Australian dollar rose when the PBoC reduced interest rates on Monday.
The Australian Dollar (AUD) extended its winning streak against the US Dollar (USD) for the third time on Monday. The Australian Dollar’s gains could be ascribed to rate decreases in China, its main trading partner.
The PBoC has lowered the 1- and 5-year loan prime rates to 3.10% and 3.60%, respectively.
The People’s Bank of China (PBoC) cut the 1-year Loan Prime Rate (LPR) to 3.10% from 3.35% and the 5-year LPR to 3.60% from 3.85% is in line with estimates. Lower borrowing costs are expected to boost Chinese domestic economic activity, potentially raising demand for Australian goods.
Australian dollar rose as domestic optimistic labor data reduced the likelihood of an RBA rate decrease this year.
Australia’s optimistic employment data, reported last week, has lessened the chance of the Reserve Bank of Australia (RBA) cutting interest rates this year. This outlook has boosted the AUD, giving ongoing support for the AUDUSD pair.
RBA Deputy Governor Andrew Hauser spoke at the CBA 2024 Global Markets Conference in Sydney on Monday, expressing some surprise at the rate of employment growth. Hauser remarked that the labor participation rate is very high and stressed that, while the RBA is data-dependent, it is not data-obsessed.
Daily Market Movers: Australian Dollar Appreciates Due to Lower Chances of RBA Rate Cuts.
The US dollar received support as fresh statistics showcasing the US economy’s resiliency dispelled expectations of a 50-basis-point rate drop by the Federal Reserve (Fed) in November. According to the CME FedWatch Tool, the probability of a 25-basis-point rate drop in November is 94.3%, with no chance of a 50-basis-point cut.
In a report last week, National Australia Bank updated its Reserve Bank of Australia (RBA) projections. “We have brought forward our expectations for the timing of rate cuts, now anticipating the first cut in February 2025, instead of May,” according to the bank. They predict a moderate pace of decreases, with rates falling to 3.10% by early 2026.
On Friday, People’s Bank of China (PBOC) Governor Pan Gongsheng The Chinese central bank has “issued specific guidelines for stock buybacks and reloans to boost holdings, emphasizing that credit funds must not illegally flow into the stock market.”
China’s Gross Domestic Product (GDP) increased at an annual rate of 4.6% in the third quarter of 2024.
China’s Gross Domestic Product (GDP) increased at an annual rate of 4.6% in the third quarter of 2024, slightly down than the 4.7% growth recorded in the second quarter but higher than market predictions of 4.5%. Quarterly GDP increased by 0.9% in Q3 2024, up from 0.7% the previous quarter but falling short of the 1.0% anticipated. In September, China’s retail sales climbed by 3.2% year on year, above both the predicted 2.5% rise and the previous result of 2.1%.
In September, US retail sales increased by 0.4% month on month, exceeding the 0.1% gain recorded. in August, with market estimates of a 0.3% increase. Furthermore, US initial jobless claims declined by 19,000 in the week ended October 11, the greatest drop in three months. The overall number of claims fell to 241,000, well below the expected 260,000.
The seasonally adjusted Employment Change in Australia increased by 64.1K in September, bringing total employment to a record 14.52 million. This considerably exceeded market forecasts for a 25.0K gain, following a revised jump of 42.6K the previous month. Meanwhile, the unemployment rate stayed unchanged at 4.1% in September, matching the revised figure for August but falling short of the expected 4.2%.
Last Thursday, Reserve Bank of Australia (RBA) Deputy Governor Sarah Hunter reaffirmed the central bank’s commitment to controlling inflation. Emphasizing that, while inflation expectations remain stable, continuing pricing pressures continue to pose substantial concerns.
