Australian Dollar remains steady as RBA Minutes indicate a restrictive policy need
|- The Australian Dollar holds its position as the RBA Minutes highlight the need for restrictive monetary policy.
- RBA Board members also emphasized that "nothing can be ruled in or out" regarding future monetary policy adjustments.
- The US Dollar may appreciate as the incoming Trump administration is expected to prioritize tax cuts and impose higher tariffs.
The Australian Dollar (AUD) stays steady against the US Dollar (USD) following Tuesday's release of the Reserve Bank of Australia's (RBA) November Meeting Minutes. The minutes indicate that the RBA board remains cautious about the potential for inflation to rise further, emphasizing the need for restrictive monetary policy.
RBA Board members also indicate no "immediate need" to adjust the cash rate, though they left the door open for future changes, noting that nothing can be ruled in or out. Current forecasts are based on the technical assumption that the cash rate will remain unchanged until mid-2025.
The Australian Dollar gained support following hawkish remarks from Reserve Bank of Australia (RBA) Governor Michele Bullock last week. Bullock emphasized that current interest rates are sufficiently restrictive and will remain unchanged until the central bank is confident about the inflation outlook.
An official from China’s National Development and Reform Commission (NDRC) stated on Tuesday that the country has "ample policy room and tools to support economic recovery." The official expressed confidence in China's economic trajectory, anticipating that the recovery momentum will persist through November and December. Any change in the Chinese economy could impact the Australian markets as both nations are close trade partners.
The US Dollar (USD) remains in a downward correction despite recent hawkish remarks from Federal Reserve (Fed) officials. However, the Greenback's downside may be limited as investors anticipate that the incoming Trump administration will prioritize tax cuts and impose higher tariffs. These measures could fuel inflation, potentially slowing the pace of Fed rate cuts.
Traders are now focused on the upcoming October US Building Permits and Housing Starts data, which is set to be released on Tuesday.
Australian Dollar receives support following RBA Meeting Minutes release
- Fed Chair Jerome Powell downplayed the likelihood of imminent rate cuts, highlighting the economy's resilience, robust labor market, and persistent inflationary pressures. Powell remarked, "The economy is not sending any signals that we need to be in a hurry to lower rates."
- On Friday, Chicago Fed President Austan Goolsbee stated that markets often overreact to changes in interest rates. Goolsbee emphasized the importance of the Fed adopting a cautious, gradual approach in moving toward the neutral rate.
- Meanwhile, Boston Fed President Susan Collins tempered expectations for continued rate cuts in the near term while maintaining market confidence in a potential rate reduction in December. Collins stated, "I don't see a big urgency to lower rates, but I want to preserve a healthy economy."
- US Retail Sales increased by 0.4% month-over-month in October, exceeding the market consensus of 0.3%. Additionally, the NY Empire State Manufacturing Index for November posted an unexpected surge, coming in at 31.2 compared to the anticipated 0.7 decline, signaling robust manufacturing activity.
- China’s Retail Sales rose by 4.8% year-over-year in October, surpassing the expected 3.8% and the 3.2% increase seen in September. Meanwhile, Industrial Production grew by 5.3% YoY, below the forecasted 5.6% and the 5.4% growth recorded in the previous period.
- The seasonally adjusted unemployment rate in Australia held steady at 4.1% in October for the third month in a row, matching market expectations. However, employment change data revealed only 15.9K new jobs added in October, which fell short of the anticipated 25.0K.
- Australia's Consumer Inflation Expectations dropped to 3.8% in November, down from 4.0% in the previous month, reaching the lowest level since October 2021.
Australian Dollar tests 0.6500, with the next key resistance located at the nine-day EMA
The AUD/USD pair hovers near 0.6500 on Tuesday, signaling short-term bearish momentum on the daily chart as it remains below the nine-day Exponential Moving Average (EMA). Additionally, the 14-day Relative Strength Index (RSI) sits below the 50 mark, reaffirming the bearish trend.
On the downside, the AUD/USD pair faces significant support around the 0.6400 level. A decisive break below this psychological barrier could amplify selling pressure, potentially driving the pair toward its yearly low of 0.6348, last recorded on August 5.
The 0.6500 level serves as immediate resistance. A sustained move above this threshold might push the AUD/USD pair toward the nine-day EMA at 0.6517, followed by the 14-day EMA at 0.6541. Surpassing these levels could pave the way for a rally toward the three-week high of 0.6687.
AUD/USD: Daily Chart
Australian Dollar PRICE Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.01% | -0.02% | -0.12% | 0.03% | -0.09% | 0.05% | 0.02% | |
| EUR | -0.01% | -0.03% | -0.13% | 0.01% | -0.11% | 0.04% | 0.00% | |
| GBP | 0.02% | 0.03% | -0.10% | 0.05% | -0.07% | 0.04% | 0.05% | |
| JPY | 0.12% | 0.13% | 0.10% | 0.16% | 0.03% | 0.16% | 0.15% | |
| CAD | -0.03% | -0.01% | -0.05% | -0.16% | -0.12% | 0.02% | 0.00% | |
| AUD | 0.09% | 0.11% | 0.07% | -0.03% | 0.12% | 0.14% | 0.12% | |
| NZD | -0.05% | -0.04% | -0.04% | -0.16% | -0.02% | -0.14% | -0.02% | |
| CHF | -0.02% | -0.01% | -0.05% | -0.15% | -0.00% | -0.12% | 0.02% |
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).
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.
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