The Australian Dollar (AUD) has managed to hold its ground against the US Dollar (USD) despite a weaker-than-expected Monthly Consumer Price Index report released on Wednesday. The Aussie found support as China, which is Australia’s largest trading partner, announced a new round of stimulus measures. The Reserve Bank of Australia (RBA) also maintained its Official Cash Rate (OCR) at 4.35% on Tuesday, affirming that rates would remain steady for the time being and ruling out a rate hike during the meeting.
In response to the economic conditions, People’s Bank of China (PBOC) Governor Pan Gongsheng announced a reduction in the reserve requirement ratio (RRR) by 50 basis points and lowered the seven-day repo rate from 1.7% to 1.5%. Additionally, the PBOC decreased the down payment requirement for second homes and cut the one-year Medium-term Lending Facility (MLF) rate. These stimulus measures from China have bolstered global growth outlook and reduced the risk of a recession.
JP Morgan has advised investors to focus on commodities and bond yields following China’s stimulus announcements, noting the positive impact on global growth. While this could reduce the risk of a recession, there is also a potential risk of reinflation. In Australia, the Monthly Consumer Price Index rose 2.7% year-over-year in August, falling short of the expected 2.8% increase. Federal Reserve Governor Michelle Bowman expressed caution regarding key inflation indicators exceeding the 2% target and advocated for a quarter percentage point reduction during an interest rate cut.
Despite the positive market outlook, US Consumer Confidence Index declined in September, while the ANZ-Roy Morgan Australia Consumer Confidence Index rose slightly. The S&P Global US Composite Purchasing Managers Index (PMI) grew at a slower rate in September, with the Manufacturing PMI indicating contraction. Chicago Fed President Austan Goolsbee and Atlanta Fed President Raphael Bostic both emphasized the need for rate cuts to support the economy in the coming year.
Technical analysis indicates that the AUD/USD pair is moving upward within an ascending channel pattern, suggesting a bullish bias. The pair could test resistance levels at 0.6930 and 0.6950, while finding support at 0.6816 and 0.6700. The Australian Dollar showed strength against the Japanese Yen in the currency market.
The Monthly Consumer Price Index (CPI) data released by the Australian Bureau of Statistics on a monthly basis measures changes in the price of goods and services acquired by household consumers. A high CPI reading is considered bullish for the Australian Dollar, while a low reading is bearish. The YoY reading compares prices in the reference month to the same month a year earlier, providing insights into inflation trends and economic conditions in Australia.
