AUD – Australian dollar
The Australian dollar is stronger this morning when valued against the Greenback, currently trading at US$0.6835 at the time of writing. The Aussie dollar rallied above US$0.6800 in Monday’s European session, outperforming its major counterparts ahead of the Reserve Bank of Australia’s (RBA) monetary policy decision, which will be announced today. The RBA’s hawkish policy outlook and the release of preliminary S&P Global PMI data for September from the US were the primary movers of the pair.
On the data front yesterday, business activity in Australia’s private sector declined in September amid a sustained manufacturing downturn. The Judo Bank flash Australia Composite PMI Output Index posted 49.8 in September, down from 51.7 in August. Falling below the 50.0 neutral mark, the latest data signalled that business activity declined in September after rising in August as slower services activity growth failed to offset a sharper downturn in manufacturing production. However, the rate of decline was marginal.
Looking ahead today, all eyes will be on the RBA’s interest rate decision, which is expected to leave rates on hold at 4.35%.
Key Movers
Last week the Federal Reserve (Fed) cut its benchmark interest rate by 50 basis points (bps), marking the first reduction in four years. The half-point move signals that the Fed is acting aggressively to keep the US economy from stalling. The US economy is showing signs of deceleration, but there are also signs of the economic activity holding resilient. The Fed has stated that the pace of the easing cycle will depend on the incoming data.
U.S. business activity was steady in September, however average prices charged for goods and services rose at the fastest pace in six months, potentially hinting at a pick-up in inflation in the coming months. S&P Global said on Monday that its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, was little changed at 54.4 this month, compared to a final reading of 54.6 in August. A reading above 50 indicates expansion in the private sector.
September’s reading aligns with reports this month, including retail sales, that have suggested the economy maintained its solid growth momentum in the third quarter. The survey’s measure of prices paid by businesses for inputs increased to a one-year high of 59.1, from 57.8 last month. Its gauge of prices charged rose to 54.7 from 52.9 in August. Rising costs, mostly in the services sector linked to wage raises, were attributed to the increase.
At face value, this would suggest that price pressures were building up again, but there is growing evidence that inflation is cooling. The survey’s flash manufacturing PMI dropped to a 15-month low of 47.0 from 47.9 in August. Economists polled by Reuters had forecast the index for the sector, which accounts for 10.3% of the economy, rising to 48.5. Its flash services PMI dipped to 55.4 from 55.7 in August, broadly in line with economists’ expectations for a reading of 55.2.
Expected Ranges
AUD/USD: 0.6700 – 0.6900 ▲
AUD/EUR: 0.6050 – 0.6250 ▲
GBP/AUD: 1.9400 – 1.9600 ▼
AUD/NZD: 1.0800 – 1.1000 ▲
AUD/CAD: 0.9150 – 0.9350 ▼