PBOC sets USD/ CNY reference rate for today at 7.1771 (vs. estimate at 7.2963)PBOC sets USD/ CNY reference rate for today at 7.1771 (vs. estimate at 7.2963)
European Central Bank big guns Lagarde and Nagel speak FridayEuropean Central Bank big guns Lagarde and Nagel speak Friday
Salient points from the Statement of Monetary Policy include,
  • Inflation has passed its peak but remains too high and more resilient than previously anticipated.
  • Recent activity indicators suggest stronger growth than previously expected.
  • Inflation and interest rates impacted growth in 2023, with cost of living pressures weighing on household consumption.
  • The RBA revised output growth higher while expecting inflation to decline more gradually.
  • Wage growth moderation is evident in some jobs and industries.
  • The outlook for growth in household consumption remains uncertain.
  • The RBA expects consumer spending to strengthen if employment does not slow as much as expected.
  • RBA anticipates relatively weak growth in major trading partners, with risks tilted to the downside.
  • Progress toward bringing inflation down is less likely in the coming quarters.
  • Risks of higher for longer inflation have increased, with the potential for further upside surprises.

Comparing the forecast tables for August and November, revisions to GDP, unemployment, and inflation were of significance. The RBA revised growth for 2024 from 1.6% to 2.0% and the unemployment rate from 4.4% at the end of 2024 to 4.2%. Notably, the RBA expects consumer price inflation to slow to 3.5% at the end of 2024 versus a previously forecast of 3.3%

There were no economic indicators for investors to consider on Friday.

Consumer Sentiment and Fed Speeches

On Friday, the influential Michigan Consumer Sentiment numbers for November need consideration. Economists forecast the Michigan Consumer Sentiment Index to slip from 63.8 to 63.7 in November. However, investors must consider the sub-components, including the Expectation and Inflation Expectation numbers.

A pickup in consumer sentiment could signal an upward trend in consumer spending. An upward trend in consumer spending could fuel demand-driven inflationary pressure. Increased spending could force the Fed to take a more hawkish rate path.

Higher borrowing costs and reduced disposable income are the likely outcomes of a hawkish rate path. A downward trend in disposable income would affect spending and ease demand-driven inflationary pressures.

Beyond the numbers, Fed speeches will also warrant attention. FOMC voting member Lorie Logan and non-voting member Raphael Bostic are on the calendar to speak on Friday. Hawkish comments aligned with Fed Chair Powell would drive demand for the US dollar.

Short-Term Forecast

The market focus will turn from the Fed to US consumer sentiment figures. After the hawkish Fed Chair Powell’s comments, the numbers need to back up the hawkish Fed stance on policy.

AUD/USD Price Action

Daily Chart

The AUD/USD remained below the 50-day and 200-day EMAs, affirming bearish price signals.

A move through the $0.63854 resistance level and the 50-day EMA would support a move toward the $0.64900 resistance level.

The US Consumer Sentiment will be the focal point on Friday. A pickup in US consumer sentiment could support a drop below $0.63500. A return to sub-$0.63500 would bring the $0.62749 support level into play.

A 14-period Daily RSI reading of 47.38 indicates a fall to the $0.62749 support level before entering oversold territory (typically below 30 on the RSI scale).

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