The Australian Dollar (AUD) experienced a downturn on Thursday, influenced by prevailing risk aversion sentiments in the market. The AUD/USD pair encountered challenges primarily due to softer Consumer Inflation Expectations and Retail Sales figures originating from Australia. These factors have heightened speculations regarding potential interest rate cuts by the Reserve Bank of Australia (RBA) in the latter half of 2024. Wednesday’s release of the Australian Monthly Consumer Price Index, indicating a softer trend, further supported this notion.
In March, Australia’s consumer expectations for future inflation witnessed a slight decrease to 4.3%, following a previous increase to 4.5%. Meanwhile, February’s seasonally adjusted Retail Sales data revealed a month-over-month increase of 0.3%, falling short of the anticipated 0.4% and the prior 1.1% increase. Additionally, Australia’s Monthly Consumer Price Index (YoY) for February reported a 3.4% rise, aligning with previous levels but slightly below the expected 3.5%.
Simultaneously, the US Dollar Index (DXY) exhibited a pause in its two-day winning streak, showing a slight decline in anticipation of the impending release of US Personal Consumption Expenditures (PCE) data scheduled for Friday. Despite this, the recent uptick in US Treasury yields may have lent support to the US Dollar (USD), fueled by differing opinions among members of the Federal Open Market Committee (FOMC) regarding monetary policy easing.
In other market movements, Australia’s Westpac Consumer Confidence dipped by 1.8% to 84.4 in March 2024 from February’s 86.0, easing from 20-month highs. However, the Westpac Leading Index (MoM) showed a modest increase of 0.1% in February, contrasting with the previous decline of 0.09%.
On the policy front, Australia’s government has pledged support for a minimum wage increase in line with inflation this year, recognizing the persistent challenges faced by low-income families amidst escalating living costs.
Internationally, at the Boao Forum for Asia (BFA), China’s top legislator, Zhao Leji, emphasized China’s commitment to inclusive economic globalization, opposing unilateralism and protectionism in all forms.
In the United States, Federal Reserve Board Governor Christopher Waller reiterated a cautious approach towards rate cuts, citing sticky inflation data. Atlanta Fed President Raphael Bostic expressed anticipation for only one rate cut this year, warning against premature reductions to avoid potential disruptions. Fed Governor Lisa Cook echoed similar sentiments, cautioning against hasty policy easing. Meanwhile, Chicago Fed President Austan Goolsbee leaned towards a dovish stance, expecting three cuts but emphasizing the need for evidence of inflation subsiding before action.
In economic indicators, US Durable Goods Orders rose by 1.4% in February, surpassing expectations, while US Housing Price Index (MoM) decreased by 0.1% in January.
Technical analysis suggests that the Australian Dollar could test the significant barrier of 0.6550, trading near 0.6530 on Thursday. Immediate resistance is observed around the 23.6% Fibonacci retracement level at 0.6541, coinciding with the major barrier of 0.6550 and the 21-day Exponential Moving Average (EMA) at 0.6553. On the downside, notable support levels include the psychological mark of 0.6500 and March’s low at 0.6477, with a breach potentially leading the AUD/USD pair to test the major support level at 0.6450.
