- The Australian Dollar is in a precarious position ahead of the US PPI and Fed policy decision.
- Australia’s Treasurer Jim Chalmers has revised the country’s budget forecast, reducing it to AUD 1.1 billion.
- US CPI and Core CPI numbers were in line with expectations, with rates at 3.1% and 4.0% YoY, respectively.
- The FOMC is not expected to make any changes to its policy rates.
The Australian Dollar (AUD) is facing challenges on Wednesday, especially after the release of moderate Consumer Price Index (CPI) data from the United States (US). The AUD/USD pair showed high volatility in the previous session, experiencing a slight decline after briefly surpassing the 0.6600 level. Investors are now eagerly anticipating the release of the US Producer Price Index (PPI) and the Federal Reserve’s (Fed) Interest Rate Decision later in the North American session.
Australia’s government is predicting a much-improved budget bottom line this year, with revenues exceeding earlier forecasts. In the mid-year economic and fiscal outlook (MYEFO) presented by Labor Treasurer Jim Chalmers, a budget deficit of just AUD 1.1 billion (USD 721.4 million) in the year to end June 2024 is projected, down from the AUD 13.9 billion forecasted back in May. The government is avoiding additional cost-of-living handouts to prevent further inflationary pressures.
The US Dollar Index (DXY) is trying to recover from recent losses amid lower US Treasury yields. The DXY has experienced a drop, with the Federal Open Market Committee (FOMC) expected to make no adjustments in its last policy decision. Inflation in the US cooled as expected in November, as indicated by the Consumer Price Index (CPI). Investors will be closely watching Fed Chair Jerome Powell’s comments for any hints about potential rate adjustments in the upcoming year.
Daily Digest Market Movers: Australian Dollar moves downward amid hawkish RBA
- ANZ-Roy Morgan Australian Consumer Confidence weekly survey rose to 80.8 from the previous week’s 76.4.
- Westpac Consumer Confidence for December showed improvement at 2.7% from the previous decline of 2.6%.
- National Australia Bank Business Confidence, which surveys the current business conditions in Australia and provides insights into the short-term performance of the overall economy, declined to 9 from the previous decrease of 2.
- RBA Governor Michele Bullock expressed confidence, stating, “Don’t think we are falling behind in the inflation fight.” Bullock emphasized a cautious approach, closely monitoring data, and highlighted the RBA’s commitment to preserving employment gains.
- US Bureau of Labor Statistics revealed on Tuesday that the US Consumer Price Index (CPI) for November rose by 0.1% month-on-month and 3.1% year-on-year. Both figures aligned with market consensus, indicating that inflation levels met expectations.
- US Core CPI, which excludes volatile food and energy prices, climbed by 0.3% MoM and 4.0% YoY, in line with expectations.
Technical Analysis: Australian Dollar hovers around the major level at 0.6550
The Australian Dollar trades around 0.6560 on Wednesday.
