Australian dollar has retreated from four-month highs following a rising unemployment rate.
The Australian Dollar (AUD) ended a three-day winning streak on Thursday as the higher than expected Australian Unemployment Rate jumped to 4.1% in April, up from 3.9% the previous month. Australia’s 10-year government bond rate fell to around 4.2% after the Wage Price Index (QoQ) rose 0.8% in the first quarter, falling short of the expected 0.9% gain. These figures support a dovish sentiment about the The Reserve Bank of Australia (RBA) is responsible for monetary policy.
The Australian Dollar strengthened in the early hours of Thursday as risk appetite improved following the announcement of lower-than-expected monthly Consumer Price Index and Retail Sales data in the United States (US) on Wednesday. This has increased the likelihood of numerous rate cuts by the Federal Reserve (Fed) in 2024, damaging the US dollar. The AUDUSD pair reached a four-month high of 0.6714 on Thursday.
The US dollar fell after the release of lower CPI and retail sales statistics on Wednesday.
The US Dollar Index (DXY), which measures the performance of the US Dollar (USD) versus six major currencies, extended its losses for the third straight day. The drop in US Treasury yields is weakening the Greenback, which could be attributable to the chance that the Fed could commence The Reserve Bank of Australia (RBA) is responsible for monetary policy.
The Australian Dollar strengthened in the early hours of Thursday as risk appetite improved following the announcement of lower-than-expected monthly Consumer Price Index and Retail Sales data in the United States (US) on Wednesday. This has increased the likelihood of numerous rate cuts by the Federal Reserve (Fed) in 2024, damaging the US dollar. The AUDUSD pair reached a four-month high of 0.6714 on Thursday.
Daily Market Movers: Australian Dollar depreciates on rising unemployment numbers.
In April, the US Consumer Price Index (CPI) fell to 0.3% month on month, compared to an expected 0.4% reading. Retail Sales remained steady, falling short of the predicted 0.4% increase.
On Tuesday, the Australian Budget returned to a deficit for 2024-25, following a $9.3 billion surplus in the previous year. The Australian government intends to combat headline inflation and ease cost-of-living pressures by devoting billions of dollars to decrease energy bills and rent, as well as attempts to lower income taxes.
The US Bureau of Labor Statistics (BLS) stated that the Producer Price Index (PPI) grew by 0.5% month on month in April, surpassing the prediction of 0.3% and rebounding. from the -0.1% contraction seen in March. The Core PPI, which excludes volatile food and energy costs, rose by 0.5% month on month, beating expectations of 0.2%.
According to Reuters, Australia’s Treasurer Jim Chalmers expects the current headline inflation rate of 3.6% to revert to the Reserve Bank of Australia’s target range of 2-3% by the end of the year. If this scenario plays out, the central bank will most likely contemplate decreasing interest rates earlier than expected.
China’s finance ministry intends to raise 1 trillion Yuan by issuing 20 to 50-year bonds to fund additional stimulus measures.
According to Reuters, China’s finance ministry intends to raise 1 trillion Yuan by issuing 20 to 50-year bonds to fund additional stimulus measures. China is also considering a scheme in which local governments across the country would buy millions of unsold homes. These developments have boosted the Australian dollar, given the close commercial linkages between Australia and China, where any changes in the Chinese economy catalyse the Australian market.
On Tuesday, Federal Reserve Chair Jerome Powell predicted that inflation will continue to drop. Powell voiced less confidence in the disinflation prognosis than earlier estimates. He also stated that GDP growth is likely to be 2% or higher, citing the labor market’s resilience as the reason for this upbeat estimate.
