The Australian Dollar (AUD) has seen a slight decline despite positive news on Tuesday regarding improved consumer confidence in Australia. The Westpac-Melbourne Institute Consumer Sentiment index rose by 6.2% in February, reaching its highest level in 20 months. However, the AUD is facing downward pressure due to expectations of moderating inflation in Australia, leading to speculation that the Reserve Bank of Australia (RBA) has completed its recent cycle of monetary tightening. This downward trend is influencing the AUD/USD pair negatively. Additionally, the AUD’s performance may be further constrained by a decrease in the Australian money market.
Meanwhile, the US Dollar (USD) remains stable after recent gains, although the rise in US Treasury yields is limiting its strength. Market sentiment is mixed as traders await the release of significant US inflation data, which could impact interest rate expectations.
In other news, National Australia Bank’s Business Confidence improved in January, while Business Conditions decreased. RBA’s Head of Economic Analysis, Marion Kohler, expressed uncertainty about current inflation forecasts for Australia but expects price growth to return to more moderate levels by 2025. The Commonwealth Bank of Australia (CBA) predicts a reduction in the benchmark interest rate for 2024, with the first cut expected in September. Additionally, China’s headline Consumer Price Index (CPI) declined, and Dallas Federal Reserve Bank President Lorie K. Logan stated that there is currently no urgent need to lower interest rates.
From a technical standpoint, the Australian Dollar is trading near 0.6520, below the immediate resistance of the 14-day Exponential Moving Average (EMA) at 0.6544. A breakthrough above this level could push the AUD/USD pair towards key levels such as the 23.6% Fibonacci retracement level at 0.6563 and the psychological resistance at 0.6600. On the downside, the psychological level of 0.6500 serves as immediate support, with further support at 0.6468 and 0.6450.
AUD/USD: Daily Chart
Australian Dollar price today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Swiss Franc.
USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
USD | 0.03% | -0.15% | 0.02% | 0.19% | 0.18% | 0.41% | 0.60% | |
EUR | -0.03% | -0.16% | -0.01% | 0.16% | 0.16% | 0.37% | 0.57% | |
GBP | 0.15% | 0.19% | 0.17% | 0.34% | 0.33% | 0.56% | 0.73% | |
CAD | -0.03% | 0.01% | -0.17% | 0.15% | 0.15% | 0.38% | 0.58% | |
AUD | -0.19% | -0.15% | -0.34% | -0.17% | -0.01% | 0.22% | 0.42% | |
JPY | -0.18% | -0.13% | -0.33% | -0.16% | 0.02% | 0.22% | 0.42% | |
NZD | -0.39% | -0.37% | -0.54% | -0.38% | -0.22% | -0.22% | 0.22% | |
CHF | -0.59% | -0.55% | -0.74% | -0.56% | -0.42% | -0.41% | -0.20% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
POUND STERLING FAQS
What is the Pound Sterling?
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data.
Its key trading pairs are GBP/USD, aka ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
How do the decisions of the Bank of England impact on the Pound Sterling?
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates.
When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money.
When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
How does economic data influence the value of the Pound?
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP.
A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
How does the Trade Balance impact the Pound?
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period.
If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.