AUD/USD rises on USD weakness

The AUD/USD pair trades at 0.6400, up more than 0.50% on Thursday.
US President Donald Trump confirmed a trade meeting with China, but no major agreements were reached.
Durable Goods Orders rose 9.2% in March, exceeding expectations. Jobless claims increased slightly to 222K.

Patricio Martín FXStreet

The AUD/USD pair holds strong on Thursday as the US Dollar (USD) remains weak. Despite some positive US economic data, including stronger-than-expected Durable Goods Orders, uncertainty around US-China trade talks and the broader tariff situation continues to affect market sentiment. The pair’s movements reflect the broader uncertainty in global markets.

Daily digest market movers: US data is mixed amid ongoing trade tensions

On the US front, Durable Goods Orders in March surged by 9.2%, exceeding market expectations for a 2% rise. Jobless claims increased slightly, with 222K new filings for the week ending April 19.
US-China trade tensions continue to weigh on market sentiment, despite talks.
The Federal Reserve’s (Fed) stance remains uncertain, with hopes for a pivot amid ongoing inflation concerns.
US economic growth forecasts for 2025/2026 have been lowered due to trade uncertainties.
Gold prices rise 1%, supported by weaker US Treasury yields and a cautious outlook for the USD.
US equities show mixed reactions to economic data, with some optimism but also resistance near record highs.
Investors are weighing the potential for a de-escalation in the US-China trade war.
Uncertainty around inflation and potential rate cuts from the Fed continue to influence market movements.
The US Dollar remains under pressure as geopolitical tensions and trade risks dominate headlines.

(The technical analysis part of this article was removed on May 22 as it didn't comply with FXStreet's editorial standards regarding the use of Artificial Intelligence.)

Australian Dollar FAQs

What key factors drive the Australian Dollar?

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.

How do the decisions of the Reserve Bank of Australia impact the Australian Dollar?

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.

How does the health of the Chinese Economy impact the Australian Dollar?

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.

How does the price of Iron Ore impact the Australian Dollar?

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.

How does the Trade Balance impact the Australian Dollar?

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.

Author

Patricio Martín

FXStreet

Patricio is an economist from Argentina passionate about global finance and understanding the daily movements of the markets.

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