Jun 12, 2023

Westpac Australian consumer confidence data will start the economic week for the financial and forex markets.

AUDUSD – Daily Chart

AUDUSD – Daily Chart

The Aussie dollar has rallied from support versus the US dollar and eyes resistance at the 0.6784 level. 

Australian consumer confidence fell in last week’s ANZ-Roy Morgan release. There are fears that the Australian central bank will hike rates again, adding further pressure to the mortgage repayment outlook for many Aussies. 

According to a survey by ANZ Bank and Roy Morgan, the consumer index fell 0.4 points, holding it in negative territory. The risk of Australia’s economy falling into a recession has risen sharply after the central bank took markets by surprise with a rate hike and threats of further action. 

Reserve Bank of Australia Governor Philip Lowe has been seeking to bring inflation down while holding unemployment near 50-year lows. After the surprise rate moved to 4.10% and a hawkish outlook of more to come, Lowe said that the path would be bumpy and that getting high inflation down would take priority over jobs. 

“I want to make it clear, though, that the desire to preserve the gains in the labour market does not mean that the Board will tolerate higher inflation persisting,” Lowe said. 

The comments made investors price at least one more rate rise and a risk of a recession, the nation’s first in more than three decades. 

“Combined with the hikes already delivered, we see this as likely stalling the economy… with a high risk of outright recession,” said Paul Bloxham at HSBC.

The analyst expects quarterly growth to average just 0.1% over the next four quarters, with a 50% chance that the economy will collapse. Commonwealth Bank put the odds of a recession this year at 50%, predicting growth to slow to 0.7% annually. 

The US Federal Reserve expects to pause its interest rate increases on Wednesday as its policy makers assess the impact of the previous hikes. 

However, the Federal Open Market Committee (FOMC) members remain divided ahead of the June 13-14 meeting, with a minority still pushing for an 11th straight hike. “I do not support stopping rate hikes unless we get clear evidence that inflation is moving down towards our 2% objective,” Fed member Christopher Waller said last month.

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