Australian Dollar Remains Stable Amid Steady US Dollar, Awaits US Data and Fed Powell’s Speech

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The Australian Dollar (AUD) experienced a reversal in its intraday gains and moved into negative territory on Monday, influenced by a stable US Dollar and improved US Treasury yields. Additionally, the decline of the ASX 200 index added further downward pressure on the Aussie Dollar, contributing to the depreciation of the AUD/USD pair. Traders are now looking ahead to key Australian data releases, including the Services Purchasing Managers Index (PMI) for February on Tuesday and the Gross Domestic Product (GDP) for the fourth quarter of 2023 on Wednesday.
The Australian Dollar received some support from the Australia Melbourne Institute Inflation for February, which showed a year-over-year rise of 4.0%. However, this increase was lower than the previous rise of 4.6%. Building Permits (MoM) declined by 1.0% in January, contrary to the expected rise of 4.0%. Nevertheless, this figure represented an improvement from the previous decrease of 10.1%. Furthermore, last week’s Consumer Price Index (CPI) data indicated a 3.4% rise in January, slightly below the market consensus of 3.5%, supporting the case for potential interest rate cuts by the Reserve Bank of Australia (RBA) later this year.
The US Dollar Index (DXY) remained stable amid a contraction in the United States manufacturing sector observed in February. While Federal Reserve (Fed) officials have not signaled any immediate interest rate cuts, they have maintained a cautious stance, which provided some support for the US Dollar. Investors are closely monitoring upcoming economic data releases, including the ISM Services PMI data, ADP Employment Change, and Nonfarm Payrolls for February. Moreover, attention will be on Federal Reserve Chair Jerome Powell’s speech scheduled for Wednesday and Thursday.
The Australian Dollar depreciated amid a stable US Dollar, with Australia’s TD Securities Inflation (MoM) decreasing by 0.1% in February, lower than the previous rise of 0.3%. However, Australian Bureau of Statistics released positive data, including Company Gross Operating Profits (QoQ) rising by 7.4% in the fourth quarter of 2023 and Australian Building Permits (YoY) rising by 10% in January. Nonetheless, concerns about Australia’s manufacturing sector persist, with Judo Bank Chief Economic Advisor Warren Hogan highlighting a lack of growth in the sector.
In global news, China’s National People’s Congress (NPC) announced its annual meeting to be held in Beijing from March 5 to March 11. Premier of the People’s Republic of China (PBoC), Li Qiang, is expected to reveal China’s economic growth target of around 5% at the session on Tuesday. Additionally, Atlanta Fed President Raphael W. Bostic expressed expectations of a potential interest rate cut towards the end of the year.
In the United States, despite a drop in the US ISM Manufacturing PMI and Michigan Consumer Sentiment Index for February, the US Personal Consumption Expenditure (PCE) Price Index and Core PCE (YoY) showed increases. The preliminary US Gross Domestic Product Annualized grew by 3.2% in the fourth quarter of 2023, slightly below market expectations. However, the preliminary US Gross Domestic Product Price Index (Q4) increased by 1.7%, surpassing expectations.