The Aussie Dollar (AUD) rebounded from its annual low on Friday, following a correction in the US Dollar (USD) and the potential interest rate hike by the Reserve Bank of Australia (RBA) on November 7.

Despite the Producer Price Index (PPI) in Australia declining year-on-year in the third quarter, the quarter-on-quarter PPI showed improvement. Recent inflation data also indicated a potential 25 basis point rate hike by the RBA in the upcoming meeting. The Consumer Price Index (CPI) increased in the third quarter of 2023, according to the Australian Bureau of Statistics (ABS).

RBA Governor Michele Bullock stated that the CPI slightly exceeded expectations but remained within the expected range. The central bank aims to control economic growth without triggering a recession.

The US Dollar Index (DXY) remains strong due to the economic growth in the US during the third quarter. Although initial Personal Consumption Expenditures (PCE) data was lower than expected, it has increased demand for bonds.

The Federal Open Market Committee (FOMC) meeting next week is expected to keep interest rates unchanged, in line with market expectations. On Friday, the US will release the monthly core Personal Consumption Expenditures (PCE) report, an important inflation indicator that provides insights into the US economy.

Market Summary: Aussie Dollar Strengthens on Possible RBA Rate Hike

  • The Australian Producer Price Index (PPI) slightly declined to 3.8% year-on-year in the third quarter (Q3), down from 3.9% in the previous quarter. Quarter-on-quarter, PPI rose to 1.8%, a significant increase from 0.5%.
  • The Australian Consumer Price Index (CPI) reached 1.2% in the third quarter of 2023, exceeding the previous quarter’s increase of 0.8% and the market consensus of 1.1% for the same period.
  • The S&P Global Australia Composite PMI for October fell to 47.3 from 51.5 previously. The Manufacturing PMI decreased slightly to 48.0 from 48.7, and the Services PMI fell into contraction territory at 47.6, down from 51.8 the previous month.
  • The RBA expressed increased concerns about inflation due to supply issues. RBA Governor Michele Bullock mentioned that if inflation remains above projections, the RBA will take responsive policy actions. Per capita demand and consumption have slowed.
  • Israeli Prime Minister Benjamin Netanyahu's announcement regarding a potential ground attack in Gaza may drive safe-haven investments. The arrival of Iranian Foreign Minister Hossein Amir-Abdollahian in the US to discuss the situation between Hamas and Israel adds complexity to the geopolitical landscape.
  • The US Gross Domestic Product (GDP) grew by 4.9% in the third quarter, exceeding market expectations of 4.2% and the previous figure of 2.1%. However, core US Personal Consumption Expenditures fell to 2.4% in the third quarter from 3.7% previously.
  • Initial weekly unemployment claims in the US for the week ending October 21 were 210,000, slightly above the market consensus of 208,000 and the previous figure of 200,000.
  • The S&P Global US Composite PMI reported growth in October, reaching 51.0 from 50.2. The Services PMI rose to 50.9, while the Manufacturing PMI increased to 50.0.
  • Investors will focus on the core Personal Consumption Expenditures (PCE) report in the upcoming Friday.

Also Read: 

US PPI Sends Aussie Dollar Soaring, Is 0.6530 Surpassed?

Dollar Falls to Lowest Level: Aussie Rebounds


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