AUD/USD drifting after mixed confidence data

  • Australian consumer confidence rebounds, business confidence eases
  • Fed members say higher bond yields could cool inflation

The Australian dollar is unchanged on Tuesday, trading at 0.6412.

Australian consumer confidence rebounds, business confidence ticks lower

Australia’s Westpac consumer confidence index rebounded in October with a 2.9% gain to 82, up from 79.7 in September. This was the highest level in six months, but consumer confidence remains deep in pessimistic territory, below the neutral 100 level. The survey found that consumers remain concerned about high inflation and the possibility of higher interest rates. The latter is somewhat surprising, as the Reserve Bank of Australia has held rates for four straight months, but nevertheless, consumers are wary about further rate hikes.

The Westpac survey found that family finances remain under pressure, which dovetails with the Reserve Bank of Australia’s finance stability report, which found a large number of households are experiencing stress over their mortgage payments.

Australia’s NAB Business Confidence came in at 1 in September, unchanged after the August reading was revised from 2 to 1. Business conditions eased in August to 11, down from 14, with the employment sub-index component declining.

The RBA has paused four straight times and the futures markets have priced in another pause at the November 7th meeting at 95%. At the meeting earlier this month, RBA Governor Bullock said that additional rate hikes were a possibility, but the markets are viewing this as lip service in order not to lose credibility in the event that the central bank unexpectedly raises rates.

Fed eyeing higher bond yields

With no major US releases until Wednesday, the focus has been on Fedspeak, with a host of Fed members making public statements early in the week. On Monday, Fed members Jefferson and Logan said the spike in long-term bond rates could mean less of a need for the Fed to raise rates. The reason is that borrowing had become more expensive and inflation could ease without the Fed needing to raise rates.

US 10-year yield rates rose as high as 4.8% last week, a 16-year high, compared to 4.0% in July. Higher yields on Treasuries have led to an increase in other borrowing costs, including mortgages and consumer loans. This could put the Fed’s hopes for a soft landing in jeopardy and are providing support for the Fed to hold rates until next year. The odds of a rate hike before the end of 2023 have fallen to 27%, compared to 39% just one week ago, according to the CME FedWatch Tool.

.

AUD/USD Technical

  • 0.6372 is a weak support line. Below, there is support at 0.6338
  • There is resistance at 0.6458 and 0.6531

 

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental and macroeconomic analysis, Kenny Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in major online financial publications including Investing.com, Seeking Alpha and FXStreet. Kenny has been a MarketPulse contributor since 2012.