The Australian Dollar (AUD) has begun to recover from its recent declines, bolstered by the assertive stance taken by officials at the Reserve Bank of Australia (RBA). After comments from RBA Governor Michele Bullock indicated that interest rates are currently at a restrictive level, the AUD has seen two consecutive days of gains. Bullock made it clear that the bank would not alter the interest rates until there is a clearer view on inflation trends.
In the bond market, Australia’s 10-year government bond yield has retreated to approximately 4.66%, a slight decline from a peak it reached a year earlier. Data recently released showed a slowdown in employment growth for October, while the unemployment rate has remained stable, suggesting that the labor market continues to show resilience. Market participants are now looking forward to the forthcoming RBA meeting minutes, expected to provide additional context regarding the central bank’s future monetary policy direction.
While the AUD has gained momentum, it may face pressures from the US Dollar (USD) as it potentially strengthens. Recent comments from Federal Reserve officials have suggested a hawkish outlook following robust economic data in the United States. Fed Chair Jerome Powell indicated that there is no immediate need to lower interest rates, highlighting the ongoing strength of the labor market and persistently rising inflation.
The economic performance in the US has shown positive signs, with retail sales rising by 0.4% in October and an unexpected increase in the manufacturing index. Meanwhile, China’s economic indicators have also surpassed expectations, with retail sales growth at 4.8% year-over-year. However, industrial production growth slightly lagged forecasts.
In Australia, the unemployment rate held steady at 4.1% for the third consecutive month, meeting market expectations, though the number of new jobs created in October came in lower than anticipated. Conversely, consumer inflation expectations in Australia have decreased, reaching levels not seen since late 2021.
Technically, the AUD/USD pair is currently hovering around 0.6470, facing short-term bearish pressure. The Relative Strength Index (RSI) is showing signs of recovery after dropping into oversold territory, suggesting that the possibility for an upward correction might emerge. Should the AUD/USD manage to break above the key resistance level of 0.6500, it could initiate a rally towards higher targets, while any decline below 0.6400 may lead to intensified downward movement.
