The Australian Dollar (AUD) sustained losses for the second consecutive session on Friday, with subdued market activity due to Good Friday trading. Meanwhile, the US Dollar (USD) strengthened on the back of robust economic expansion in the United States (US), fueled by consumer spending, further weakening the AUD/USD pair.
Factors contributing to the Australian Dollar’s struggles include weaker Consumer Inflation Expectations and Retail Sales figures from Australia. These indicators heightened expectations of potential interest rate cuts by the Reserve Bank of Australia (RBA) later in 2024. Additionally, Wednesday’s release of softer Australian Monthly Consumer Price Index figures reinforced this outlook.
The US Dollar Index (DXY) appears set to extend its winning streak, supported by hawkish comments from Federal Reserve (Fed) officials, particularly from Fed Governor Christopher Waller. Waller’s remarks on Wednesday hinted at a possible delay in interest rate cuts amidst strong inflation data. Investors are now eagerly awaiting the US Personal Consumption Expenditures (PCE) report on Friday, which serves as the Fed’s preferred inflation gauge, for further guidance.
Key Market Movements:
Australian Consumer Inflation Expectations for March dipped to 4.3%, slightly down from the previous 4.5%.
Seasonally adjusted Australian Retail Sales in February increased by 0.3% month-over-month, falling short of the expected 0.4% and the prior 1.1%.
Australia’s Monthly Consumer Price Index (YoY) for February rose by 3.4%, maintaining consistency with previous levels but slightly below the anticipated 3.5%.
The Australian government has pledged to support a minimum wage increase in line with inflation this year to address challenges faced by low-income families amid rising living costs.
At the Boao Forum for Asia (BFA), China’s top legislator, Zhao Leji, emphasized China’s commitment to inclusive economic globalization and opposition to unilateralism and protectionism.
Despite persistent inflation, Federal Reserve Board Governor Christopher Waller sees ‘no rush’ to cut rates.
Atlanta Fed President Raphael Bostic expects only one rate cut this year, warning against premature reductions that could disrupt the economy.
US Gross Domestic Product Annualized expanded by 3.4% in Q4 2023, surpassing market expectations of a 3.2% increase.
The US Gross Domestic Product Price Index remained steady with a 1.7% increase in Q4, in line with expectations.
Core Personal Consumption Expenditures (QoQ) in Q4 stood at 2.0%, slightly below expectations and the previous reading of 2.1%.
US Initial Jobless Claims fell to 210K in the week ending March 22, contrary to expectations of a rise to 215K from the prior 212K.
Technical Analysis:
The Australian Dollar trades near 0.6510 on Friday, with immediate resistance noted around the 23.6% Fibonacci retracement level at 0.6528, followed by the 21-day Exponential Moving Average (EMA) at 0.6547, and a significant barrier at 0.6550. On the downside, notable support rests at the psychological mark of 0.6500, followed by March’s low at 0.6477. A breach below this level could potentially lead the AUD/USD pair to test the major support level at 0.6450.
