- The Australian dollar falls as RBA Deputy Governor Hauser advises against making policy based on a single inflation report.
- High inflation in Australia has sparked speculation the RBA will raise interest rates again in August.
- The US dollar is gaining on higher yields ahead of Friday’s release of core PCE inflation data.
The Australian dollar (AUD) is losing ground against the U.S. dollar (USD) on Friday, which can be attributed to dovish comments from Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser. Hauser said that formulating policy in response to a single inflation report would be a “major mistake.” He stressed that there is still a set of economic data that will require detailed analysis, according to Bloomberg.
The AUD rose after the release of a higher-than-expected monthly Consumer Price Index (CPI) for May. Continued high inflation has fuelled speculation that the RBA could raise interest rates again in August.
The US dollar (USD) is gaining in value due to higher US Treasury yields. Friday’s core PCE price index inflation is forecast to decline year-over-year to 2.6% from the previous 2.8%. This data is seen as the Federal Reserve’s (Fed) preferred measure of inflation.
Daily Market Review: Australian Dollar Falls on Fed’s Hawkish Speech
- The yield on Australia’s 10-year government bond rose above 4.4% to a three-week high, while high inflation data raised concerns the Reserve Bank of Australia could raise interest rates again at its next meeting in August.
- Michelle Bowman, a member of the Federal Reserve (Fed) Board of Governors, noted on Thursday that she is still not ready to support a central bank rate cut because inflationary pressures remain high. Bowman said, adding: “We are still not at a point where it is appropriate to lower the interest rate, and I still see a number of risks to inflation going up,” according to Reuters.
- Year-over-year U.S. gross domestic product rose 1.4% in the first quarter, slightly higher than the previous reading of 1.3% but still showing the slowest growth since the declines in the first half of 2022.
- US Initial Jobless Claims showed on Thursday that the number of people applying for unemployment benefits fell to 233,000 in the week ending June 21, below market expectations of 236,000. Claims fell for the second week in a row since hitting a 10-month high. 243,000 in early June.
- The first US presidential debate between President Joe Biden and the Republican Party’s presidential candidate Donald Trump began on CNN News. Biden acknowledged that “inflation has kept prices much higher than they were at the beginning of his term, but said he deserves credit for ‘putting it together again’ in the wake of the coronavirus pandemic.” In response, Trump condemned the elevated levels of inflation. He suggested that tariffs would reduce the deficit and urged countries like China to be investigated, according to Reuters.
- On Wednesday, Reserve Bank of Australia (RBA) Deputy Governor Christopher Kent said the latest data underscored the need to remain vigilant about the potential rise in inflation. Kent noted that current policies were contributing to slower demand growth and lower inflation. He also mentioned that no options were being ruled out for future rate adjustments, according to Bloomberg.
- Australia’s monthly consumer price index (CPI) rose 4.0% in the year to May, compared to a 3.6% augment recorded in April, according to data released by the Australian Bureau of Statistics (ABS) on Wednesday. This growth exceeded the market forecast, which predicted an augment of 3.8% in the reporting period.
Technical analysis: Australian dollar falls below 0.6650
On Friday, the Australian dollar is trading at around 0.6630. Analysis of the daily charts indicates a neutral bias for the AUD/USD pair as it consolidates in a rectangular formation. The 14-day relative strength index (RSI) is at 50, which also suggests neutral momentum. Further movement may signal a clear directional trend.
The AUD/USD pair finds support near the 50-day exponential moving average (EMA) at 0.6618. A break of this level could lead the pair to test the lower boundary of the rectangle pattern near 0.6585.
On the other hand, the AUD/USD pair may encounter resistance near the upper boundary of the rectangle formation near 0.6695, close to the psychological level of 0.6700. Further resistance comes at 0.6714, the highest level since January.
AUD/USD: Daily chart
AUSTRALIAN DOLLAR PRICE TODAY
The table below shows the percentage change in the Australian Dollar (AUD) against the major currencies traded today. The Australian dollar was the weakest against the Japanese yen.
| USD | EUR | GBP | JPY | BOOR | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.08% | 0.00% | -0.02% | 0.04% | 0.02% | 0.16% | 0.09% | |
| EUR | -0.08% | -0.08% | -0.12% | -0.04% | -0.07% | 0.08% | 0.00% | |
| GBP | 0.00% | 0.08% | -0.04% | 0.02% | 0.00% | 0.16% | 0.08% | |
| JPY | 0.02% | 0.12% | 0.04% | 0.04% | 0.02% | 0.16% | 0.12% | |
| BOOR | -0.04% | 0.04% | -0.02% | -0.04% | -0.03% | 0.12% | 0.04% | |
| AUD | -0.02% | 0.07% | -0.00% | -0.02% | 0.03% | 0.15% | 0.08% | |
| NZD | -0.16% | -0.08% | -0.16% | -0.16% | -0.12% | -0.15% | -0.08% | |
| CHF | -0.09% | -0.01% | -0.08% | -0.12% | -0.04% | -0.08% | 0.08% |
The heat map shows the percentage changes of the major currencies relative to each other. The base currency is selected from the left column, while the quote currency is selected from the top row. For example, if you select 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).
Economic indicator
Basic personal consumption expenditure – price index (m/m)
Basic Personal Consumption Expenditures (PCE), published by US Bureau of Economic Analysis measures monthly changes in the prices of goods and services purchased by consumers in the United States (US). The PCE Price Index is also the Federal Reserve’s (Fed) preferred measure of inflation. The MoM indicator compares the prices of goods in a reference month to the previous month. The core reading excludes the so-called more volatile components of food and energy to provide a more precise measure of price pressures. Generally speaking, a high reading is bullish for the US dollar (USD), while a low reading is bearish.
