09/09/24

24

The Australian Dollar (AUD) has regained strength against the US Dollar (USD) amidst a favorable outlook from the Reserve Bank of Australia (RBA). Recent comments from RBA Governor Michele Bullock indicated that discussions about rate cuts are premature, reinforcing expectations that rates will remain stable for the foreseeable future, despite ongoing concerns about inflation.

China’s economic data appears to have a muted effect on the AUD. The Consumer Price Index (CPI) for August increased by 0.6% year-on-year, a slight rise from July’s 0.5%, but it fell short of the anticipated 0.7%. Monthly figures also reflected slower inflation, with a 0.4% rise in August compared to 0.5% in July. Given Australia’s significant trade ties with China, fluctuations in Chinese economic indicators could have considerable repercussions for Australian markets.

In a recent update, RBC Capital Markets adjusted its expectation for a potential rate cut by the RBA to February 2025, moving it forward from May 2025. Although inflation in Australia continues to exceed the RBA’s target, a slowdown in economic growth is not currently seen as justification for immediate rate cuts.

Meanwhile, the US Dollar has received a boost as uncertainty surrounding the Federal Reserve’s interest rate decisions grows. Markets are anticipating at least a modest rate cut in September, though the likelihood of a more aggressive 50 basis point cut has slightly decreased. Employment data recently revealed that while job additions were below expectations, the Unemployment Rate did fall to 4.2%.

Recent shifts in economic forecasts, including downward revisions for China’s growth, have also influenced global market dynamics. Data indicates that Australia’s trade surplus widened unexpectedly, and GDP growth for the second quarter was recorded at 0.2%, slightly above previous trends but still below forecasts.

Currently, the AUD/USD pair is trading around 0.6680, remaining under pressure. The immediate support level is identified at the 50-day Exponential Moving Average (EMA) of 0.6676, and further declines could push the pair towards lower support levels. On the contrary, potential resistance is seen at the nine-day EMA of 0.6720, where a breakout could signal a resurgence towards previous highs.