Australian Dollar Rises on Strong Wage Data, Global Supportive Numbers

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Summary:

The Australian Dollar (AUD) experienced upward momentum following robust wage data, with Australia's Wage Price Index rising to 4.0% year-on-year in Q3, surpassing market expectations. The figures indicate potential for further Reserve Bank of Australia interest rate hikes, supporting the AUD. External factors, including positive economic indicators from China and the U.S., played a significant role in the currency's movement. China reported higher-than-expected industrial production and retail sales, signaling a positive outlook for Australia's key trade partner. Additionally, weaker-than-expected U.S. CPI inflation data eased concerns of aggressive interest rate hikes by the Federal Reserve, contributing to the global rally of risk-sensitive assets, including the Aussie Dollar. However, analysts suggest that wage growth in Australia may have peaked, and the market is now anticipating a shift in RBA rate hike expectations, which could impact the AUD's future trajectory.

The Australian Dollar (AUD) demonstrated strength in the wake of encouraging wage data, as the country's Wage Price Index for the third quarter surpassed market expectations, rising to 4.0% year-on-year. This exceeded the anticipated 3.9% figure and outperformed the previous quarter's outcome of 3.6%. On a quarter-on-quarter basis, the 1.3% increase aligned with expectations but represented a notable uptick from the 0.9% rise in Q2. These figures suggest that wages continue to exert upward pressure on domestic inflation, potentially influencing the Reserve Bank of Australia (RBA) to consider further interest rate hikes.

The Australian Dollar's reaction was evident in currency pairs, with the Australian Dollar to U.S. Dollar exchange rate climbing to 0.6509, the Pound to Australian Dollar exchange rate declining to 1.9158, and the Euro to Australian Dollar rate falling to 1.6711.

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However, analysts from Commonwealth Bank caution that recent survey data indicates wage growth may have peaked. They anticipate a reversal in market pricing for additional RBA rate hikes, potentially leading to a lower AUD/USD.

External factors played a crucial role in shaping the Australian Dollar's movements. Positive economic indicators from China, a key trade partner for Australia, included a 4.6% year-on-year increase in industrial production in October, surpassing expectations. Retail sales in China also exceeded consensus forecasts, jumping 7.6% in the year to October. These developments signaled an improved outlook for Australia's economic connections.

The primary catalyst for the AUD's gains, however, came from the U.S., particularly following the release of weaker-than-expected U.S. CPI inflation data. The data suggested that the Federal Reserve might be concluding its interest rate hike cycle, boosting global equities and risk-sensitive assets, including the Australian Dollar. Market expectations have adjusted, with an anticipation of interest rate cuts by mid-year, further supporting the global economic backdrop and currencies like the Australian Dollar.

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AUDCHF pair presents favorable buying opportunities, with the market positioned above the support level at 0.57692. Buyers are actively pushing the market toward targeted levels, indicating potential strength in the Australian Dollar against the Swiss Franc.

The intricate interplay of domestic wage dynamics, global economic indicators, and central bank expectations creates a complex landscape for the Australian Dollar, requiring market participants to closely monitor evolving factors for a nuanced understanding of its future trajectory.

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Alex

Economic

The US Senate took the risk of an impending partial government shutdown off the table on Wednesday as it passed a stopgap spending bill and sent it to President Joe Biden to sign into law before a weekend deadline.

The 87-11 vote marked the end of this year's third fiscal standoff in Congress that saw lawmakers bring Washington to the brink of defaulting on its more than US$31 trillion (RM146 trillion) in debt this spring and twice within days of a partial shutdown that would have interrupted pay for about four million federal workers.

The last near-miss with shutdown led to the Oct 3 ouster of Republican US House of Representatives Speaker Kevin McCarthy that left the chamber leaderless for three weeks.

But lawmakers have bought themselves just a little more than two months' breathing room. The Democratic-majority Senate and Republican-controlled House of Representatives' next deadline is Jan 19, just days after the Iowa caucuses signal the start of the 2024 presidential campaign season.

"No drama, no delay, no government shutdown," Democratic Senate Majority Leader Chuck Schumer said prior to the vote.

McCarthy's successor, Speaker Mike Johnson, produced a stopgap funding bill that drew broad bipartisan support, a rarity in modern US politics. Democrats said they were happy it stuck to spending levels that had been set in a May agreement with Biden and did not include poison-pill provisions on abortion and other hot-button social issues.

Republicans said they were eager to avoid the risk of a shutdown, which would have closed national parks and disrupted everything from scientific research to financial regulation. But hardline members of Johnson's 221-213 Republican majority voiced anger at the compromise, saying they would try to rein in federal spending again when current funding expires.

"The speaker has now 10 days to work it out and get Republicans to actually stand up and fight when we get back," Representative Chip Roy, a prominent hardliner, said as House lawmakers left Washington for a Thanksgiving holiday break. "We expect that fight when we get back."

The legislation would extend funding for military construction, veterans benefits, transportation, housing, urban development, agriculture, the Food and Drug Administration and energy and water programmes through Jan 19. Funding for all other federal operations — including defence — would expire on Feb 2.

The repeated fights over providing funding to keep the government operating — Congress's most essential function — have prevented lawmakers from acting on other proposals, including Biden's request for US$106 billion in aid for Israel, Ukraine and US border security.

Source: Reuters

To stay updated on all economic events of today, please check out our Economic calendar

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Thomas

Palestinian-Israeli conflict

Latest news on the Israeli-Palestinian conflict

0:02

Air raid sirens sounded in northeastern Israel, suspected of being attacked by Hezbollah drones.

Latest News on the Israeli-Palestinian Conflict (November 16)_1

0:04

Hezbollah in Lebanon launched attacks on the Israeli border, with missiles hitting the Hadab Yaroun, Birket Risha, Jabal Tayarat and Jal Al-Alam IOF locations.

0:30

The US military is assisting Israel with tens of thousands of 155mm artillery shells, thousands of shoulder-fired anti-bunker missiles and 200 suicide drones.

An internal Pentagon document seen by Bloomberg on Wednesday morning detailed a list of weapons aid proposed by "senior Israeli leaders" as of the end of October:

2,000 laser-guided Hellfire missiles for Apache helicopters and 36,000 rounds of ammunition for the helicopter's 30mm cannon. Apaches have been conducting aid missions near ground forces in the Gaza Strip and along the Lebanese border.

Missiles and ammunition for the artillery have been provided to the Israel Defense Forces. Israel asked Nammo Talley Defense to manufacture 3,000 M141 anti-bunker rockets. These shoulder-fired missiles are capable of penetrating concrete up to 20 centimeters; as of the end of October, 1,800 of them had been shipped.

Israel also requested 400 120mm mortar shells.