The Australian Dollar experienced a notable decline against the U.S. Dollar on Wednesday, marking its fourth consecutive day of losses. The shift was prompted by the release of the Wage Price Index, which indicated a year-over-year increase of 3.5% for the third quarter, down from 4.1% in the previous quarter and falling short of expectations set at 3.6%. This figure represents the slowest wage growth recorded since the end of 2022.
The Reserve Bank of Australia’s hawkish stance, reiterated by Governor Michele Bullock, underscores the necessity of maintaining restrictive monetary policy in light of ongoing inflation concerns and a strong labor market. While this sentiment has provided some support for the Australian Dollar, it has not been sufficient to counterbalance the effects of the weak wage data.
Meanwhile, the US Dollar gained strength amid discussions surrounding potential fiscal policy changes under a possible Trump administration. Analysts suggest that these policies could lead to heightened investment and labor demand, thus increasing inflation risks and pressuring the Federal Reserve to adopt a more restrictive monetary stance.
Attention is now focused on the imminent release of US inflation data. Analysts expect the Consumer Price Index will rise 2.6% year-over-year for October, with core inflation anticipated to increase by 3.3%.
In Australia, consumer sentiment showed signs of improvement with the Westpac Consumer Confidence index rising by 5.3%, reaching its highest level in two and a half years. However, the index remains below the benchmark of 100 for nearly three years, indicating a prevailing sense of caution among consumers.
On the international front, Chinese regulators are reportedly planning to reduce taxes on home purchases, which could influence the economic dynamics between Australia and its largest trading partner. A recent stimulus package from China aimed at supporting local government financing has, however, been perceived as falling short of expectations, thereby dampening demand for Australian exports. The Australian Dollar’s outlook remains bearish as it trades near three-month lows, with significant tests at key support levels ahead.
