- Australian Dollar could gain ground on bullish momentum.
- Australia’s Dollar cheered the improved prices of copper and iron.
- Should AUD falter, the US Dollar could extend its gains following the firmer-than-expected US GDP figures.
- US GDP Annualized (Q4) came in at 3.3% above the market consensus of 2.0%.
The Australian Dollar (AUD) strives to build on its recent gains for the second consecutive session on Friday. The bullish momentum seems to be resurfacing, supporting a notable upward movement in the AUD/USD pair. Interestingly, the Australian Dollar strengthens even in the face of an improved US Dollar (USD), despite the backdrop of lower US Treasury yields. However, the volatility is expected to subside as financial markets are closed in observance of the Australia Day Holiday.
Australia’s Dollar reacted positively to the favorable performance of copper and iron. Additionally, the AUD might have received some support from the recent news mentioning additional stimulus measures by the People’s Bank of China (PBoC). However, the Reserve Bank of Australia (RBA) is still expected to reduce borrowing costs later this year. Changes to the stage three tax cut package might introduce a slight delay in the timeline for the first rate cut, potentially pushing it back by a couple of months.
The Reserve Bank of Australia’s (RBA) Bulletin suggests that businesses, over the last six months, have generally foreseen a slowdown in their price growth. The prevailing expectation is that, on average, prices will remain above the RBA’s inflation target range of 2.0–3.0%.
The US Dollar Index (DXY) could attempt to capitalize on recent gains following the firmer-than-expected US GDP figures, which further reinforced the already resilient stance of the United States (US) economy. The US Gross Domestic Product Annualized (Q4) reported a reading of 3.3% against the previous reading of 4.9%, exceeding the market consensus of 2.0%.
US Treasury Secretary Janet Louise Yellen has remarked that the robust performance of the US economy in the fourth quarter is viewed as a positive development and is not likely to pose challenges in terms of inflation. Yellen attributes the strong Q4 GDP data to vigorous and healthy spending, coupled with productivity improvements. She further emphasizes that there is nothing in the GDP report that suggests a threat to the prospect of a ‘soft landing’ scenario for the US economy.
Traders are poised to closely monitor the upcoming Personal Consumption Expenditures (PCE) Price Index data on Friday. Following the release of the GDP report, the US Bureau of Economic Analysis is set to publish the PCE Price Index data, providing insights into the monthly changes in both Personal Spending and Personal Income.
Daily Digest Market Movers: Australian Dollar seems to gain ground amid a stable US Dollar
- Australia’s Manufacturing PMI increased from 47.6 to 50.3, showcasing improvement. Services PMI also saw an uptick, rising from 47.1 to 47.9. The Composite PMI registered an increase, reaching 48.1 compared to December’s 46.9.
- Australia’s Westpac Leading Index (MoM) declined by 0.03% in December against November’s growth of 0.07%.
- National Australia Bank’s Business Conditions inched down to the reading of 7 in December from 9 prior.
- National Australia Bank’s Business Confidence improves to -1 from the previous figure of -9.
- Australia’s Consumer Inflation Expectations remained steady at 4.5% in January.
- The Chair of Australia’s sovereign wealth fund Peter Costello commented that inflation in Australia is showing early signs of moderation. However, Costello emphasizes that there is still a considerable distance to cover to bring prices back within the RBA’s target band.
- Chinese financial media reported that the People’s Bank of China (PBoC) may cut the Medium-term Lending Facility (MLF) rate in the current quarter. The announcement follows the recent statement by PBoC Governor Pan Gongsheng, who revealed that the Bank would reduce the Required Reserve Ratio (RRR) by 50 basis points starting from February 5th.
- US Initial Jobless Claims for the week ending on January 19, surprisingly reduced to 214K compared to the expected increase of 200K from 189K prior.
- US Gross Domestic Product Price Index (Q4) reduced to a growth of 1.5% from the previous growth of 3.3%.
- US S&P Global Manufacturing PMI climbed to an 11-month high of 50.3 in January against the forecast of remaining consistent at 47.9.
- US Services PMI rose to 52.9 against the expected reading of 51 and 51.4 prior. While Composite PMI increased to 52.3 from the previous reading of 50.9.
Technical Analysis: Australian Dollar remains below the psychological level at 0.6600
The Australian Dollar trades around 0.6590 on Friday, encountering immediate resistance at the psychological level of 0.6600. This level aligns with the 23.6% Fibonacci retracement at 0.6606, followed by the 14-day Exponential Moving Average (EMA) at 0.6615. A decisive breakthrough above this resistance zone might propel the AUD/USD pair toward the major barrier at 0.6650. Conversely, on the downside, there’s a possibility of revisiting the weekly low at 0.6551, coinciding with the significant level at 0.6550. If this support is breached, the pair could face additional downward pressure, potentially retesting the monthly low at 0.6524.
AUD/USD: Daily Chart
Australian Dollar price today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Euro.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.06% | 0.02% | -0.08% | -0.12% | 0.03% | 0.01% | -0.01% | |
| EUR | -0.05% | -0.03% | -0.13% | -0.18% | 0.00% | -0.04% | -0.06% | |
| GBP | -0.03% | 0.03% | -0.11% | -0.16% | 0.02% | -0.01% | -0.03% | |
| CAD | 0.07% | 0.13% | 0.09% | -0.06% | 0.10% | 0.09% | 0.07% | |
| AUD | 0.11% | 0.16% | 0.13% | 0.02% | 0.15% | 0.13% | 0.10% | |
| JPY | -0.04% | 0.00% | -0.02% | -0.12% | -0.17% | -0.01% | -0.04% | |
| NZD | 0.00% | 0.04% | 0.01% | -0.09% | -0.14% | 0.02% | -0.01% | |
| CHF | 0.00% | 0.06% | 0.02% | -0.07% | -0.12% | 0.04% | 0.02% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
GDP FAQs
A country’s Gross Domestic Product (GDP) measures the rate of growth of its economy over a given period of time, usually a quarter. The most reliable figures are those that compare GDP to the previous quarter e.g Q2 of 2023 vs Q1 of 2023, or to the same period in the previous year, e.g Q2 of 2023 vs Q2 of 2022.
Annualized quarterly GDP figures extrapolate the growth rate of the quarter as if it were constant for the rest of the year. These can be misleading, however, if temporary shocks impact growth in one quarter but are unlikely to last all year – such as happened in the first quarter of 2020 at the outbreak of the covid pandemic, when growth plummeted.
A higher GDP result is generally positive for a nation’s currency as it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as attracting higher foreign investment. By the same token, when GDP falls it is usually negative for the currency.
When an economy grows people tend to spend more, which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation with the side effect of attracting more capital inflows from global investors, thus helping the local currency appreciate.
When an economy grows and GDP is rising, people tend to spend more which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold versus placing the money in a cash deposit account. Therefore, a higher GDP growth rate is usually a bearish factor for Gold price.
Read the full article here