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11 July 2024 | FXGT.com

AUD Holds Steady Amid Weaker Consumer Confidence and Strong Business Sentiment

  • Australian Dollar Steadies: The Australian Dollar remained rangebound around $0.6750 as investors assessed the outlook for Reserve Bank of Australia (RBA) monetary policy amid a mix of economic reports.
  • Consumer Confidence: Australian consumer confidence weakened in July, with Westpac Consumer Confidence dropping by 1.1%, reversing a 1.7% increase in June. This marked the fifth decline in 2024 due to concerns over high inflation and elevated interest rates.
  • Business Sentiment: Business sentiment, however, jumped to a 17-month high in June, with the NAB Business Confidence index rebounding to 4, the highest level since January 2023. Most industries, including manufacturing, posted increases, although business conditions and employment fell, reflecting the slowing economy.
  • Upcoming Inflation Expectations: Investors look ahead to July consumer inflation expectations data later this week for further guidance on the RBA’s policy direction.
  • RBA Rate Hike Expectations: Markets have reduced bets for an RBA rate hike, now seeing only around a 20% chance in August. Despite this, the AUD remained strong relative to its peers amid expectations that the RBA could fall behind in the global rate-cutting cycle or even raise rates again amid strong inflation data for May.
  • China’s CPI Impact: The AUD is pressured by disappointing inflation data from China, Australia’s close trade partner. China’s CPI rose at an annual rate of 0.2% in June, down from 0.3% in May and below the forecasted 0.4% increase. On a monthly basis, Chinese CPI inflation declined by 0.2% in June, compared to a 0.1% decline in May, missing the expected decline of 0.1%.
  • Powell’s Testimony Impact: Fed Chair Jerome Powell emphasized that a rate cut is not appropriate until there is greater confidence that inflation is moving towards 2%. Despite acknowledging improving inflation figures, the Fed remains cautious.
  • US Economic Data: Traders are focused on the US CPI data to be released today. Forecasts predict the annualized US core CPI will remain steady at 3.4%, while headline CPI inflation is expected to rise by 0.1% month-over-month in June.
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