- Aussie climbs on upbeat risk appetite and a softer US Dollar.
- Traders downplay the potential impact of new tariffs.
- RBA expected to cut the cash rate from 4.35% to 4.10%.
The AUD/USD pair posts a fresh two-month high at 0.6373 in Monday’s session. The Aussie pair strengthens as the Australian Dollar (AUD) performs strongly in an upbeat market mood. Market sentiment is favorable for risky assets as investors expect United States (US) President Donald Trump’s tariff agenda will not prove as impactful as initially feared, as well as a softer US Dollar (USD).
Daily digest market movers: Aussie set to test RBA decision
- Global trade disputes have recently boosted risk-sensitive currencies, with the Australian Dollar tracking higher as the United States Dollar retreated.
- The Aussie capitalized on the Greenback’s pullback, clawing back from midweek losses and briefly reclaiming the 0.6399 region at the top of its monthly range.
- With inflation pressures in Australia trending lower, market participants anticipate a Reserve Bank of Australia (RBA) rate cut from 4.35% to 4.10% on Tuesday.
- Nonetheless, the RBA could deliver a hawkish surprise by highlighting labor-market tightness and residual inflation risks.
- In that sense, markets will closely monitor the tone of the statement as the RBA could continue being the last of the G10 central banks to cut rates.
AUD/USD technical outlook: Momentum builds above 0.6365 as pair eyes 100-day SMA
The AUD/USD pair rose to 0.6365 on Monday, notching levels unseen since December and firmly crossing its 20-day Simple Moving Average. The Relative Strength Index (RSI) is at 67, pushing into near-overbought territory with strong upside momentum, while the Moving Average Convergence Divergence (MACD) histogram prints rising green bars.
Should risk appetite remain robust and markets absorb any RBA rate decision smoothly, the Aussie could extend gains toward the 100-day Simple Moving Average near 0.6670.
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
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 falls toward 1.0800 after breaking below nine-day EMA
EUR/USD continues its decline for the third consecutive session, hovering around 1.0830 during Friday’s Asian trading hours. The technical analysis of the daily chart suggests growing selling pressure and a possible trend reversal, as the pair has fallen below the ascending channel pattern.
GBP/USD consolidates above mid-1.2900s; remains close to multi-month peak set on Thursday
GBP/USD struggles to gain any meaningful traction on Friday amid mixed fundamental cues. A modest USD uptick caps the upside, though the divergent Fed-BoE outlook lends support. Spot prices, meanwhile, remain on track to register modest gains for the third straight week.
Gold price retreats further from all-time peak amid broadly stronger US Dollar
Gold price attracts some sellers as a modest USD strength prompts some profit-taking. Fed rate cut bets should cap the US recovery and support the non-yielding yellow metal. Trade jitter and rising geopolitical tensions could further limit losses for the XAU/USD.
Bitcoin, Ethereum and Ripple stabilize as SEC Crypto Task Force prepares for First roundtable discussion
Bitcoin price hovers around $84,500 on Friday after recovering nearly 3% so far this week. Ethereum and Ripple find support around their key levels, suggesting a recovery on their cards.
Tariff wars are stories that usually end badly
In a 1933 article on national self-sufficiency1, British economist John Maynard Keynes advised “those who seek to disembarrass a country from its entanglements” to be “very slow and wary” and illustrated his point with the following image: “It should not be a matter of tearing up roots but of slowly training a plant to grow in a different direction”.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.