Australian Dollar appreciates following PMI data, awaits RBA policy decision
- The Australian Dollar gained ground ahead of the RBA’s policy decision on Tuesday.
- Australia's Judo Bank Services and Composite PMIs improved to 51.0 and 50.2, respectively, in October.
- The US Dollar faced challenges amid uncertainty surrounding the US presidential election.
The Australian Dollar (AUD) maintains its position after registering gains in the previous session following improved Purchasing Managers Index (PMI) data released on Tuesday. Traders await the Reserve Bank of Australia’s (RBA) interest rate decision scheduled to be released later in the day.
The final reading of Australia's Judo Bank Services PMI improved to 51.0 in October from 50.6 in the previous reading. This figure was above the market consensus of 50.6. The Composite PMI climbed to 50.2 in October versus 49.8 prior. Additionally, Caixin China Services PMI rose to 52.0 in October from 50.3 in September.
The Reserve Bank of Australia is anticipated to keep the Official Cash Rate (OCR) steady at 4.35%, marking an eighth consecutive pause in November. The central bank is expected to hold current rates following its policy meeting.
Traders will likely focus on the RBA’s updated economic forecasts and Governor Michele Bullock’s press conference for new insights on the potential timing of the bank’s first rate cut since its post-COVID tightening cycle.
Investors will closely monitor the outcome of the US presidential election. Former President Donald Trump and Vice President Kamala Harris both predicted victory as they campaigned across Pennsylvania on Monday in the final, frantic day of an exceptionally close US presidential election.
Daily Digest Market Movers: Australian Dollar receives support from improved PMI data
- The opinion polls show that Trump and Harris are virtually even. The final winner may not be known for days after Tuesday’s vote. Trump has already indicated he may challenge any unfavorable result, as he did in 2020.
- The US dollar (USD) struggled amid the election-related uncertainty, with strategists linking the currency’s weakness to a Des Moines Register/Mediacom poll showing Democratic nominee Kamala Harris leading Republican candidate Donald Trump 47% to 44% in Iowa.
- The US Federal Reserve’s (Fed) policy decision on Thursday will also be closely watched. Markets expect a modest 25 basis point rate cut this week. The CME FedWatch Tool shows a 99.5% probability of a quarter-point rate cut by the Fed in November.
- The TD-MI Inflation Gauge rose by 0.3% month-over-month in October, up from a 0.1% increase in the prior month, marking the highest reading since July and preceding the RBA's November policy meeting. Annually, the gauge climbed by 3.0%, compared to the previous 2.6% reading.
- ANZ Australia Job Advertisements increased by 0.3% month-over-month in October, a notable slowdown from the upwardly revised 2.3% gain in September. Despite the weaker growth, this marks the second consecutive month of increases.
- China’s Commerce Minister Wang Wentao met with Australia’s Trade Minister Don Farrell on Sunday. China expressed hopes that Australia will continue enhancing its business environment and ensure fair and equitable treatment for Chinese companies.
- US Bureau of Labor Statistics (BLS) indicated that October’s Nonfarm Payrolls increased by only 12,000, following a revised September gain of 223,000 (down from 254,000), which fell well short of market expectations of 113,000. Meanwhile, the Unemployment Rate remained steady at 4.1% in October, matching the consensus forecast.
- Australia's Producer Price Index rose by 0.9% quarter-on-quarter in Q3, following a 1.0% increase in the prior period and surpassing market forecasts of a 0.7% rise. This marks the 17th consecutive period of producer inflation. On an annual basis, the PPI growth slowed to 3.9% in Q3, down from the previous quarter’s 4.8% increase.
Technical Analysis: Australian Dollar remains below 0.6600, nine-day EMA
AUD/USD trades near 0.6590 on Tuesday, with the daily chart hinting at a potential easing of the bearish trend as the pair tests the nine-day Exponential Moving Average (EMA). However, the 14-day Relative Strength Index (RSI) remains below 50, indicating that the bearish outlook persists.
On the resistance side, AUD/USD faces the nine-day EMA at 0.6596, with further resistance at the 14-day EMA at 0.6618. A break above these levels could strengthen the pair, possibly aiming for a psychological level of 0.6700.
In terms of support, immediate support is around the three-month low at 0.6536. A drop below this level could drive the pair toward the key psychological support at 0.6500.
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 Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.03% | -0.03% | 0.03% | -0.01% | -0.10% | -0.10% | -0.01% | |
| EUR | 0.03% | 0.00% | 0.07% | 0.01% | -0.10% | -0.07% | 0.02% | |
| GBP | 0.03% | -0.00% | 0.04% | -0.01% | -0.11% | -0.08% | 0.02% | |
| JPY | -0.03% | -0.07% | -0.04% | -0.05% | -0.15% | -0.17% | -0.05% | |
| CAD | 0.01% | -0.01% | 0.00% | 0.05% | -0.09% | -0.09% | 0.00% | |
| AUD | 0.10% | 0.10% | 0.11% | 0.15% | 0.09% | -0.00% | 0.10% | |
| NZD | 0.10% | 0.07% | 0.08% | 0.17% | 0.09% | 0.00% | 0.10% | |
| CHF | 0.00% | -0.02% | -0.02% | 0.05% | -0.01% | -0.10% | -0.10% |
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 Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
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