Key Moments
- AUD/USD trades around 0.7140, having briefly touched a three-year high at 0.7147 before easing.
- Australian consumer inflation expectations rise to 5% in February from 4.6% in January, the highest level in nearly three years.
- Stronger-than-expected US labor data dampens near-term Federal Reserve rate-cut expectations, lending support to the US Dollar.
Spotlight on AUD/USD Performance
AUD/USD trades around 0.7140 on Thursday at the time of writing, up 0.21% on the day after briefly reaching a three-year high at 0.7147. The pair is easing slightly from those highs as the US Dollar (USD) recovers some ground following solid US labor market data, but it remains firmly supported above the 0.7100 psychological threshold.
Rising Inflation Expectations Support the Aussie
The Australian Dollar (AUD) continues to draw support from domestic factors. Data from the Melbourne Institute show that Australian consumer inflation expectations rose to 5% in February from 4.6% in January, marking their highest level in nearly three years. This pickup is fueling speculation that the Reserve Bank of Australia (RBA) may maintain its tightening bias in order to manage price pressures.
Last week, the RBA raised its key rate for the first time in more than two years, taking it to 3.85%, and indicated that additional hikes remain on the table if inflation stays stubborn. Governor Michele Bullock reiterates that the central bank remains data-dependent and does not rule out another increase should inflation expectations stay elevated.
Hawkish comments from RBA Deputy Governor Andrew Hauser also contribute to the AUD’s strength. At the same time, strategists at OCBC point to a divergence between the relatively strong performance of the foreign exchange market and the more cautious signal coming from rates markets, where overnight index swaps are pricing in only modest further tightening.
US Labor Data Tempers Fed Rate-Cut Hopes
On the US side, the Nonfarm Payrolls (NFP) report showed on Wednesday that employment rose by 130,000 in January, almost double the 70,000 expected. The Unemployment Rate declined to 4.3% from 4.4%. Although the concentration of job gains in the healthcare sector and downward revisions to prior data temper optimism, the figures ease fears of a sharp slowdown in the labor market.
On Thursday, weekly Initial Jobless Claims fell to 227,000, reinforcing signs of resilience in employment conditions. Against this backdrop, expectations of an imminent rate cut by the Federal Reserve (Fed) are scaled back. Futures markets significantly reduce the chance of easing as soon as March and now favor a potential cut in June.
Australian Dollar Performance Against Major Currencies
The following table shows the percentage change of the Australian Dollar (AUD) against major currencies today. According to the data, the Australian Dollar was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | — | -0.08% | -0.26% | -0.08% | -0.02% | -0.15% | -0.36% | -0.26% |
| EUR | 0.08% | — | -0.19% | 0.02% | 0.04% | -0.09% | -0.28% | -0.18% |
| GBP | 0.26% | 0.19% | — | 0.19% | 0.25% | 0.11% | -0.09% | 0.00% |
| JPY | 0.08% | -0.02% | -0.19% | — | 0.04% | -0.08% | -0.32% | -0.19% |
| CAD | 0.02% | -0.04% | -0.25% | -0.04% | — | -0.13% | -0.35% | -0.24% |
| AUD | 0.15% | 0.09% | -0.11% | 0.08% | 0.13% | — | -0.20% | -0.10% |
| NZD | 0.36% | 0.28% | 0.09% | 0.32% | 0.35% | 0.20% | — | 0.10% |
| CHF | 0.26% | 0.18% | -0.00% | 0.19% | 0.24% | 0.10% | -0.10% | — |
The heat map shows percentage changes of major currencies against each other. The base currency is taken from the left column, while the quote currency is taken from the top row. For example, if you select the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box represents AUD (base)/USD (quote).
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