Australian dollar edges higher as consumer sentiment soars

• Australian consumer and business confidence head higher after RBA pause
• Australian dollar edges higher
• US releases CPI on Wednesday

The Australian dollar has posted slight gains today. In the North American session, AUD/USD is trading at 0.6653, up 0.18%.

Australian consumer sentiment jumps

Australia’s Westpac Consumer Sentiment was red-hot in April, climbing 9.4% to 85.8, up from 78.4 a month earlier. This crushed the market consensus of 0.8% and follows a flat reading in March. This marks the highest reading since June 2022. Despite the impressive surge, consumer confidence remains weak, well below the 100-level which separates positive and negative territory.

Business indicators were also positive. The NAB Business Confidence index rose from -1 to -4 in March, close to the estimate of zero. Business Conditions was almost unchanged at 16, just shy of the estimate and the previous reading, both of which were 17 points.

The improvement in the consumer and business confidence data can be largely attributed to the Reserve Bank of Australia’s decision to pause rates at the April meeting, after ten straight rate increases. High interest rates have taken their toll on households and businesses, and the RBA would love nothing more than to extend the pause in rates at the May 2^nd meeting. Still, inflation remains the central bank’s number one priority, and the battle promises to be a long one. CPI fell to 6.8% in February, down from 7.4% a month earlier but more than triple the target of 2%. The March inflation report will be released about a week before the RBA decision and will be a key factor as to whether the RBA extends its pause or raises rates by 25 basis points.

There are no tier-1 events on the calendar today, but Wednesday we’ll get a look at the US inflation report for March. The battle to contain inflation is making progress but has gone slower than the Fed had expected. This has meant extending the rate-tightening cycle and a 25-bp is likely at the May meeting. Headline inflation is expected to fall to 5.4% in March, down from 6% in February. The core rate is projected to inch higher to 5.6%, up from 5.5%.

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AUD/USD Technical

• The round number of 0.6700 is a weak resistance line. Next, there is resistance at 0.6791
• AUD/USD has support at 0.6608 and 0.6548

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