Australian dollar losing momentum as markets expect the Fed to deliver nominal additional rate reduction.

The Australian Dollar (AUD) continues weak versus the US Dollar (USD) on Tuesday, pulled down by negative trade balance data from China, Australia’s largest trading partner, which was issued on Monday. Furthermore, China’s fiscal stimulus plan, released over the weekend, failed to lift the Australian dollar since investors were unsure of the package’s size.

The ANZ-Roy Morgan Consumer Confidence Index stayed at 83.4 this week.

The Australian weekly poll of consumer confidence showed little movement, with the ANZ-Roy Morgan Consumer Confidence index. This week’s average remains at 83.4. Despite the steady level, the longer-term trend indicates that Consumer Confidence has been below 85.0 for a record 89 consecutive weeks. The current value is 1.3 points above the 2024 weekly average of 82.1.

The dwindling possibility of more Fed rate reduction supports the US dollar.

The US Dollar (USD)  supported by rising expectations that the US Federal Reserve (Fed) will resist significant interest rate reduction. According to the CME FedWatch Tool, markets are pricing in an 83.6% chance of a 25-basis-point rate decrease in November, with no expectation of a greater 50-basis-point reduction.

Daily Market Movers:Australian dollar has remained weak due to China’s economic troubles.

Fed President Neel Kashkari soothed markets late on Monday by confirming the Fed’s data-dependent policy. approach. Kashkari echoed common Fed policymaker views on the robustness of the US economy, citing continuous softening of inflationary pressures and a strong labor market, despite a recent increase in the total unemployment rate, according to Reuters.

The AUD may have experienced negative pressure from a comprehensive note from the Commonwealth Bank of Australia stating that the Reserve Bank of Australia (RBA) will conduct a 25 basis point rate cut by the end of 2024. The research highlighted that a larger disinflationary trend than the RBA anticipated is required for the Board to consider lowering policy this calendar year.

The risk-sensitive AUD/USD pair may have faced downward pressure due to escalating tensions in the Middle East, which have generated concerns about a larger regional conflict. According to CNN, a drone attack in north-central Israel on Sunday killed at least four Israeli soldiers and injured more than 60.

China’s military began maneuvers in the Taiwan Strait and around Taiwan on Monday. A representative for the US Department of State voiced deep worry over the People’s Liberation Army’s (PLA) military operations. Taiwan’s Defense Ministry responded, saying, “We will not escalate the conflict in our response.”

The National Bureau of Statistics of China stated that the country’s monthly Consumer Price Index (CPI) stayed constant at 0% in September, down from a 0.4% gain in August. The annual inflation rate increased by 0.4%, falling short of the expected 0.6%. Furthermore, the Producer Price Index (PPI) declined by 2.8% year on year, a greater drop. than the prior decline of 1.8%, and above projections of a 2.5% drop.

National People’s Congress voiced optimism on Saturday after receiving a briefing from China’s Ministry of Finance (MoF).

The National People’s Congress voiced optimism on Saturday after receiving a briefing from China’s Ministry of Finance (MoF). The MoF stressed crucial concerns such as stabilizing the property market and addressing local government debt issues. The ministry stated that special bonds would be issued to support both bank recapitalization and efforts to stabilize the real estate industry.

Austan Goolsbee, President of the Chicago Fed, spoke with Bloomberg and praised the progress in inflation and the labor situation. Goolsbee highlighted that, despite the excellent September jobs statistics, there are no signs of the economy overheating.

Last Monday, the Reserve Bank of Australia issued the minutes of its September monetary policy meeting, showing that

Board members considered future interest rate scenarios that included both lower and higher rates. The discussion suggested that future financial conditions may need to be tighter or looser than current levels in order to accomplish the Board’s objectives.