- AUD/USD gains on soft US data and RBA’s hawkish outlook.
- RBA Bullock reiterates hawkish stance, signaling no near-term rate cuts.
- Monetary policy diveargence favors the Aussie as US data softens and RBA remains hawkish.
The AUD/USD pair traded in a tight range on Thursday but tallied daily gains after the USD was seen weak after mixed US data.
The Australian economy's uncertain prospects and the Reserve Bank of Australia's (RBA) aggressive stance on interest rates have led to a shift in market expectations. However, the bank hasn't yet embraced cuts in the near term.
Daily digest market movers: Australian Dollar gains slightly after trade figures and hawkish RBA
- Australian exports rose 0.7% MoM and 1.4% YoY in July, while imports fell by 0.8% MoM and 3.0% YoY.
- Exports to China slumped significantly in July, with coal and iron ore prices continuing to decline.
- On Thursday, RBA Governor Bullock maintained a hawkish stance, reiterating that the Board does not expect to cut rates in the near term.
- Across the Pacific, US labor market data disappointed, while ISM Services PMI figures helped the USD recover some losses.
- Monetary policy divergence continues to favor the Aussie, with RBA cash rate futures pricing in a high probability of a 25 bps cut by December.
AUD/USD technical outlook: Indicators flash mixed signals, overall outlook remains positive
On the daily chart, the Relative Strength Index (RSI) points up while the Moving Average Convergence Divergence (MACD) prints a red bar, and both flash mixed signals. However, with the pair above the Simple Moving Average (SMA), the overall outlook is positive, with the pair set to retest the zone above 0.6780.
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 holds above 1.1100 ahead of US jobs report
EUR/USD stays in a consolidation phase above 1.1100 after posting strong gains for two consecutive gains. Investors await the August jobs report from the US, which will include Nonfarm Payrolls and wage inflation figures.
GBP/USD consolidates near 1.3200 as focus shifts to NFP
GBP/USD trades in a narrow range slightly below 1.3200 in the European session on Friday. Market participants refrain from taking large positions as focus shifts to August Nonfarm Payrolls data from the US, which could influence the Fed's rate outlook.
Gold price bulls turn cautious near $2,525 hurdle ahead of US NFP report
Gold price (XAU/USD) climbed closer to the $2,524-2,525 supply zone on Thursday amid some follow-through US Dollar (USD) selling, led by bets for a larger interest rate cut by the Federal Reserve (Fed) later this month.
Nonfarm Payrolls expected to show modest hiring rebound in August after July’s tepid report
The Nonfarm Payrolls report is forecast to show that the US economy added 160,000 jobs in August, after creating 114,000 in July. The Unemployment Rate is likely to dip to 4.2% in the same period from July’s 4.3% reading.
Why Ethereum is underperforming Bitcoin, Solana, Nvidia, Meta, Apple and others
Ethereum (ETH) is down 2% on Thursday following a key analysis showing the top altcoin has underperformed assets, including Bitcoin, Solana, Nvidia, Meta, Apple, Gold and others. CryptoQuant analysts and the F2pool co-founder weigh in on why ETH has underperformed and what investors should expect.
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.