AUD/USD Helped by Strong AU Wage Growth & Hawkish RBA Minutes

  • AUDUSD
    (${instrument.percentChange}%)

AUD/USD Analysis

The Reserve Bank of Australia has refrained from hiking over the past two meetings, as the labor market shows signs of easing, the economy is weak and price pressures are decelerating. The Consumer Price Index (CPI) moderated to 4.1% y/y in the fourth quarter, marking the smallest increase in a year.

However, inflation is far from the 2-3% target and policymakers don't expect a return to that range for nearly two more years. Historically high pay growth makes that goal harder and today's data revealed that wages grew 4.2% y/y in Q4, the most since 2009. This is also the first time in two years that the Wage Price Index outpaced inflation, risking a wage-price spiral.

The central bank stood pat in February, but refused to rule out further tightening and this week's accounts of that decision showed that officials discussed hiking rates [1], enhancing the hawkish bias. They want confidence that inflation is moving sustainably to target and the wage data don't help.

AUD/USD rises this week helped by the hawkish minutes and the WPI increase, which keeps pressure on the RBA for monetary restraint. It tests the EMA200 and has the chance to take out the 38.2% Fibonacci of the last leg down (0.6605), which could bring 0.6769 in the spotlight.

Trade the News: View our Economic Calendar

However, the upside looks unfriendly with the daily Ichimoku Cloud looming large and the rise may be reaching its limits. A rejection of the aforementioned technical levels will reaffirm the bearish bias and could lead to new 2024 lows (0.6442). The RBA believes that wage growth "is not expected to increase much further and remains consistent with the inflation target" [2] and markets believe that interest rates have peaked. Furthermore, the greenback may find support as markets moderated substantially their rate cut bets for the Fed.

Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 21 Feb 2024 https://www.rba.gov.au/monetary-policy/rba-board-minutes/2024/2024-02-06.html

2

Retrieved 19 Apr 2024 https://www.rba.gov.au/media-releases/2024/mr-24-01.html

${getInstrumentData.name} / ${getInstrumentData.ticker} /

Exchange: ${getInstrumentData.exchange}

${getInstrumentData.bid} ${getInstrumentData.divCcy} ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%) ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%)

${getInstrumentData.oneYearLow} 52/wk Range ${getInstrumentData.oneYearHigh}
Disclosure

Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.

Past Performance: Past Performance is not an indicator of future results.

Spreads Widget: When static spreads are displayed, the figures reflect a time-stamped snapshot as of when the market closes. Spreads are variable and are subject to delay. Single Share prices are subject to a 15 minute delay. The spread figures are for informational purposes only. FXCM is not liable for errors, omissions or delays, or for actions relying on this information.