AUD/USD recovers as weaker US GDP sparks US yields drop
|- AUD/USD rises to 0.6632 as US Q1 GDP growth slows to 1.3%, below expectations.
- US Initial Jobless Claims increase slightly to 219K; Pending Home Sales plunge in April.
- Traders focus on upcoming Australian Housing Credit data and China’s NBS PMIs, alongside US PCE Price Index release.
The Australian Dollar recovered against the US Dollar on Thursday trading, as US Q1 2024 GDP data was softer than expected, sparking a fall in US Treasury yields and the US Dollar. At the time of writing, the AUD/USD trades at 0.6632, virtually unchanged, following gains of 0.35%.
AUD/USD gains 0.35% on weaker US data and Fedspekaing
The economy in the United States posted weaker-than-expected figures. The Gross Domestic Product for the first quarter in the second estimate expanded by just 1.3%, lower than the 1.6% expected, and trailed last year's fourth quarter's 3.4% increase.
At the same time, Initial Jobless Claims for the last week were revealed, portraying an increase of 219K, slightly above the consensus estimate of 218K and higher than the previous week's reading of 216K.
Other data showed that Pending Home Sales for April tumbled from 3.6% to -7.7% MoM and, on an annual basis, plunged -7.4% from a 0.1% expansion.
Elsewhere, Fed officials crossed the wires. New York Fed President John Williams commented that monetary policy is well-positioned, that inflation is too high, and that he doesn’t feel urgency to slash interest rates. He added that inflation would reach the Fed’s 2% goal in early 2026.
Recently, Chicago’s Fed President Austan Goolsbee added that prices could still fall without rising unemployment.
What’s ahead for AUD/USD traders?
The economic schedule will feature Housing Credit data for April on the Australian front. Alongside that, AUD/USD traders would be eying China’s NBS Manufacturing and Non-Manufacturing PMIs, which are expected to expand by 50.5 and 51.5, respectively.
On the US front, traders are anticipating the release of April’s Personal Consumption Expenditures (PCE) Price Index, which is the Fed’s preferred measure of inflation.
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
Australian Dollar PRICE This week
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies this week. Australian Dollar was the strongest against the Euro.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.13% | 0.07% | -0.13% | 0.11% | -0.03% | 0.00% | -1.22% | |
| EUR | -0.13% | -0.09% | -0.22% | -0.01% | -0.23% | -0.22% | -1.33% | |
| GBP | -0.07% | 0.09% | -0.20% | 0.04% | -0.13% | -0.06% | -1.27% | |
| JPY | 0.13% | 0.22% | 0.20% | 0.19% | 0.07% | 0.22% | -1.13% | |
| CAD | -0.11% | 0.00% | -0.04% | -0.19% | -0.16% | -0.10% | -1.39% | |
| AUD | 0.03% | 0.23% | 0.13% | -0.07% | 0.16% | 0.09% | -1.14% | |
| NZD | -0.01% | 0.22% | 0.06% | -0.22% | 0.10% | -0.09% | -1.24% | |
| CHF | 1.22% | 1.33% | 1.27% | 1.13% | 1.39% | 1.14% | 1.24% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
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