Downward Pressure on Australian Dollar as Market Awaits Consumer and Business Confidence Data, RBA Governor's Speech, and US Inflation Report
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- Australia releases consumer and business confidence on Tuesday
The Australian dollar has posted slight losses in Monday trading. In the North American session, AUD/USD is trading at 0.6564, down 0.18%.
The Aussie continues to show sharp swings and declined 1.50% last week. This snapped a three-week winning streak in which the Australian dollar surged 4.9% against its US counterpart.
Australian dollar eyes consumer and business confidence
Australia will release consumer and business confidence data on Tuesday. Consumer confidence fell sharply in November, as the Westpac Consumer Sentiment index declined 2.6% to 79.9, down from 82 in October. Consumers are deeply concerned about the rising cost of living and the possibility of further interest rate increases. The markets are expecting a rebound in December, with a forecast of 3.0%.
The NAB Business Confidence index is expected to improve to -1 in November. The index came in at -2 in October, the first time it dropped into negative territory in four months. The zero level separates pessimism from optimism.
Reserve Bank of Australia Governor Michele Bullock speaks at an event in Sydney on Tuesday and the markets will be looking for hints regarding future rate policy. The RBA held the cash rate at 4.35% at its meeting earlier this month and doesn’t meet again until February. This will give policy makers a chance to monitor the effect of elevated rates on the economy.
US nonfarm payrolls beats forecast
Friday’s US nonfarm payrolls came in at 199 thousand in November, higher than the consensus estimate of 180,000 and the October gain of 150,000. Unemployment dropped from 3.9% to 3.7% and average hourly earnings rose to 0.4% m/m, up from 0.2% in October and above the market consensus of 0.3%. The strong data points to a resilient labour market despite signs that the economy is cooling down, and has reduced fears of recession. The markets are still expecting around four rate cuts in 2024, while the Fed is still talking about possible rate hikes. Tuesday’s inflation report will be closely watched by the markets, and if CPI is stronger than expected, the markets may have to tone down their expectations of a rate cut early in 2024.
AUD/USD Technical
- AUD/USD tested support at 0.6555 earlier. Below, there is support at 0.6523
- 0.6585 and 0.6613 are the next resistance lines
