- The Australian Dollar lost ground after the RBA’s policy decision to keep interest rate at 4.35%, as expected.
- The Australian Central Bank has extended its pause for the fourth meeting.
- The US Dollar remains subdued due to a prevalent risk appetite, fueled by expectations regarding rate cuts by the Fed.
The Australian Dollar (AUD) halted its winning streak on Tuesday after the Reserve Bank of Australia (RBA) decided to keep its interest rate unchanged at 4.35%. However, markets were speculating that the RBA might adopt a more hawkish stance, fueled by last week's inflation data, which exceeded expectations. The Australian economy witnessed a decrease in inflation during the first quarter, marking the fifth consecutive quarter of deceleration, despite exceeding initial forecasts. Additionally, the country's monthly CPI indicator surged in March, contrary to market expectations of stagnation.
Reserve Bank of Australia (RBA) Governor Michele Bullock addressed a press conference after the May monetary policy announcement. Bullock emphasized the importance of remaining vigilant regarding inflation risks. The RBA believes that current interest rates are appropriately set to steer inflation back towards its target range of 2-3% in the second half of 2025, and to the midpoint in 2026. Despite encountering some volatility in the data, the bank is adopting a longer-term perspective.
The US Dollar Index (DXY), which gauges the performance of the US Dollar (USD) against six major currencies, continues to face pressure following the release of softer US labor data on Friday. This development has reignited hopes for potential interest rate cuts by the Federal Reserve (Fed) in 2024.
Daily Digest Market Movers: Australian Dollar extends gains due to improved risk appetite
- According to a report by Bloomberg, Richmond Federal Reserve (Fed) President Thomas Barkin said on Monday that elevated interest rates will further dampen US economic growth and help alleviate inflation pressures, bringing them closer to the central bank's 2% target. Barkin also noted that the solid labor market allows the Fed the opportunity to ensure that inflation is consistently trending lower before considering reductions in borrowing costs. However, he cautioned that continued inflation in the housing and services sectors poses a risk of keeping price increases elevated.
- TD Securities Inflation (YoY) released by The University of Melbourne, came down to 3.7% in April, from the previous month’s 3.8%. In the meantime, the monthly rate remained at 0.1%.
- China's Caixin Services Purchasing Managers' Index (PMI) for April dipped slightly to 52.5 from 52.7 in March, which is in line with expectations. Nonetheless, it signifies the 16th consecutive month of expansion in services activity. This positive trend has the potential to uplift Australia's market, given its significant role as one of the largest exporters to China.
- On Friday, Nonfarm Payrolls showed that the US economy added 175,000 jobs in April, lower than the estimated 243,000 and signaling a significant slowdown from March's addition of 315,000 jobs.
- The Judo Bank Australia Composite Purchasing Managers Index (PMI) declined in April, indicating a slightly slower growth in Australian private sector output. The growth in business activity was mainly confined to the service sector while manufacturing output continued to decrease.
- According to forecasts by analysts at Commonwealth Bank and Westpac, the RBA’s interest rate is expected to peak at its highest point at 4.35% in November 2023, then decrease to 3.10% by December 2025.
Technical Analysis: Australian Dollar drops to near 0.6600
The Australian Dollar traded around 0.6610 on Tuesday. The pair consolidates within a symmetrical triangle pattern, with the 14-day Relative Strength Index (RSI) above the 50-level, suggesting a bullish bias.
The AUD/USD pair could potentially retest the upper boundary near the major support level of 0.6650. A breakthrough above this level might prompt the pair to revisit March’s high of 0.6667, followed by the psychological level of 0.6700.
On the downside, the AUD/USD pair may encounter immediate support at the psychological level of 0.6600, followed by the nine-day Exponential Moving Average (EMA) at 0.6569. If the pair breaks below the EMA, it could face further pressure, testing the throwback support at the 0.6480 level. Subsequently, the lower boundary of the symmetrical triangle around the level of 0.6465 may serve as another support level.
AUD/USD: Daily Chart
Australian Dollar price today
The table below shows the percentage change of the Australian Dollar (AUD) against listed major currencies today. The Australian Dollar was the weakest against the Swiss Franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.03% | 0.10% | 0.08% | 0.46% | 0.07% | 0.07% | -0.01% | |
| EUR | -0.04% | 0.06% | 0.05% | 0.43% | 0.05% | 0.03% | -0.03% | |
| GBP | -0.11% | -0.06% | -0.02% | 0.37% | -0.01% | -0.03% | -0.09% | |
| CAD | -0.08% | -0.05% | 0.01% | 0.39% | 0.01% | -0.02% | -0.07% | |
| AUD | -0.46% | -0.44% | -0.39% | -0.39% | -0.40% | -0.41% | -0.46% | |
| JPY | -0.07% | -0.05% | 0.02% | 0.00% | 0.36% | -0.01% | -0.06% | |
| NZD | -0.06% | -0.04% | 0.03% | 0.02% | 0.41% | 0.01% | -0.06% | |
| CHF | -0.01% | 0.02% | 0.08% | 0.08% | 0.46% | 0.07% | 0.06% |
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 Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (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.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD retreats toward 1.0850 despite weak US employment data
EUR/USD loses its traction and declines toward 1.0850 after testing 1.0900 earlier in the session. Because Nonfarm Payrolls data for October missed the market expectation by a wide margin due to hurricanes and strikes, the US Dollar manages to hold its ground.
GBP/USD climbs above 1.2950, looks to end week little changed
GBP/USD benefits from the improving risk mood and trades in positive territory above 1.2950 in the American session on Friday as markets ignore the weak labor market data from the US. The pair remains on track to end the week flat.
Gold clings to small gains near $2,750 after US data
Gold clings to marginal recovery gains and trades slightly above $2,750. The 10-year US Treasury bond yield struggles to push higher after the dismal October jobs report and weaker-than-expected PMI data from the US, helping XAU/USD keep it footing.
Bitcoin Weekly Forecast: Run toward fresh all-time high hinges on US presidential election results
Bitcoin could experience a price pullback in the next few days ahead of the US presidential election, analysts say, an event that will be key to determining whether and how the crypto class will be regulated in the years to come.
Bank of Japan holds rates steady amid signs of modest GDP growth
Monthly industrial production results have been mixed but generally indicate a modest recovery in third-quarter GDP. Clear guidance from the Bank of Japan remains elusive, with each upcoming meeting being pivotal.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.