01/11/24

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The Australian Dollar experienced a slight decline against the US Dollar after a brief period of gains, impacted by the mixed results in the Producer Price Index (PPI) data published on Friday. Despite this downward movement, the Australian Dollar continues to receive support due to expectations that the Reserve Bank of Australia will adopt a hawkish monetary policy stance.

According to the latest data, Australia’s PPI rose by 0.9% in the third quarter, exceeding market expectations of 0.7% and following a 1.0% increase in the previous quarter. This marks a sustained period of producer inflation, with a total of 17 consecutive quarters registering increases. However, on a yearly basis, PPI growth decelerated to 3.9%, down from 4.8% recorded in the prior quarter.

In related news, China’s manufacturing index saw an uptick in October, with the Caixin Manufacturing PMI reaching 50.3, compared to 49.3 in September, and surpassing the anticipated figure of 49.7. Given China’s status as a significant trading partner for Australia, these changes could have noteworthy implications for the Australian economic outlook.

Meanwhile, the US Dollar has faced pressures following the release of the Personal Consumption Expenditures Price Index data, which has contributed to market apprehension, particularly with the upcoming US presidential election on the horizon. Investors are keenly awaiting the Nonfarm Payrolls report, with job additions for October projected at 113,000 and unemployment rates expected to hold steady at 4.1%.

The broader economic backdrop reveals that US core inflation rose 2.7% year-over-year in September, alongside a significant drop in jobless claims, indicating resilience in the labor market. Conversely, Australia’s retail sales figures indicated moderate growth, with a monthly increase of just 0.1% in September, falling short of the expectations of 0.3%.

The Reserve Bank of Australia has indicated that the current cash rate of 4.35% strikes a necessary balance in managing inflation within its target range of 2% – 3% while supporting employment. With consumer confidence dipping this week, economic perspectives remain cautious.

Technical analysis shows that the Australian Dollar may need to break free from a descending channel to affirm its bearish trend. Currently trading around 0.6570 against the US Dollar, the pair’s performance may hinge on whether it can test established support levels, potentially leading to further declines or upward challenges against resistance points.