The Australian Dollar continues to trend downwards following a decision made by the People’s Bank of China (PBoC) to maintain its one-year Loan Prime Rate at 3.1%. This monetary policy stance occurred during the central bank’s fourth quarterly meeting, where both one- and five-year Loan Prime Rates were held steady. In tandem, Australia reported a 0.5% month-over-month increase in Private Sector Credit for November, marking the sector’s most robust monthly growth in four months. Year-over-year, Private Sector Credit sits at a 6.2% increase, reflecting a slight uptick from October’s figures.
Pressure on the Australian Dollar is mounting as market participants speculate that the Reserve Bank of Australia (RBA) may lower its cash rate of 4.35% as early as February, prompted by signs of a potential economic slowdown. The RBA’s upcoming release of its meeting minutes next week is highly anticipated by traders looking for insight into future policy directions.
Meanwhile, the US Dollar gained strength, bolstered by a better-than-expected Gross Domestic Product (GDP) growth rate of 3.1% for the third quarter, exceeding previous forecasts. Furthermore, Initial Jobless Claims reduced to 220,000 for mid-December, illustrating a labor market resilience that contrasts sharply with the concerns in Australia.
Amid a global risk-averse sentiment following a somewhat hawkish rate decision by the Federal Reserve, the Australian Dollar remains under pressure. Australia’s bond yields are on the rise, echoing trends in the US following the Fed’s actions. This volatility is compounded by rising Consumer Inflation Expectations in Australia, which reached 4.2%, marking the highest levels since September.
In the broader context, outlooks provided by banking analysts suggest the Reserve Bank may not commence rate cuts until May 2025, although February remains a distinct possibility. Reports indicate predictive figures for unemployment and inflation are being monitored closely as the economy stabilizes into the upcoming periods.
Consumer confidence in Australia has declined by 2% in December as reported by the Westpac survey, which could further influence economic sentiment. Export dynamics with China are also under scrutiny, given recent reports of increasing capital outflows, contributing to a nuanced backdrop for the Australian currency’s performance.
Currently trading around 0.6230 against the US Dollar, the Australian Dollar’s technical outlook indicates bearish trends with a chance of an upward correction given its oversold status. Key resistance levels and potential support levels are being closely watched by traders as they navigate these fluctuations in the market.
