The Australian Dollar (AUD) advances against the US Dollar (USD) on Wednesday, recovering its recent losses registered in the previous session. The AUD/USD pair appreciates as the AUD receives support from the cautious remarks from the Reserve Bank of Australia (RBA) Assistant Governor Sarah Hunter, who said that recent data has been a little stronger than expected, adding that inflation is likely to be stronger than forecast in the third quarter (Q3).
RBA Assistant Governor Sarah Hunter also said that labor market and economic conditions might be tighter than assumed. Hunter highlighted that uncertainty about the global outlook remains elevated and stated that the board will adjust policy as appropriate as new information comes to hand. Expected consumer momentum to soften a little in Q3, she added.
The AUD/USD pair moves little after the release of China’s Consumer Price Index (CPI), which declined 0.3% year-over-year (YoY) in September. The market consensus was for a 0.1% decline in the reported period, following a fall of 0.4% in August. Meanwhile, the monthly inflation rose to 0.1%, weaker than the expected 0.2%. China’s Producer Price Index (PPI) fell 2.3% YoY, following a 2.9% fall prior, as expected.
US President Donald Trump criticized China on Wednesday for its recent protectionist trade policies, threatening additional targeted trade restrictions if China goes ahead with imposing fresh rare earth mineral export controls and additional port fees for foreign container ships in Chinese ports. An hour earlier, Trump appeared to be hopeful on a trade reproach between the United States (US) and China.
The US and China decided to charge additional port fees on ocean shipping companies that transport everything from holiday toys to crude Oil. The US is scheduled to start collecting fees on Tuesday. China also started to collect the special taxes on US-owned, operated, built, or flagged vessels, but stated that Chinese-built ships would be exempted from the levies. It is important to note that any change in the Chinese economy could impact the AUD as China and Australia are close trading partners.
US Dollar extends its losses following dovish remarks from Fed Powell
- The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, is extending its losses for the second successive session and trading around 98.90 at the time of writing.
- The Greenback faced challenges after US Federal Reserve (Fed) Chair Jerome Powell stated that the central bank is on track to deliver another quarter-point interest-rate reduction later this month, even as a government shutdown significantly reduces its read on the economy. Powell highlighted the low pace of hiring and noted that it may weaken further.
- The CME FedWatch Tool indicates that markets are now pricing in nearly a 94% chance of a Fed rate cut in October and a 93% possibility of another reduction in December.
- Philadelphia Fed President Anna Paulson said on Monday that rising risks to the job market argue for more interest rate cuts by the US central bank, as trade tariffs now appear unlikely to push up inflation as much as expected.
- The Federal Open Market Committee (FOMC) Minutes from the September meeting suggested policymakers are leaning toward further rate cuts this year. The majority of policymakers supported the September rate cut and signaled further reduction later this year. However, some members favored a more cautious approach, citing concerns about inflation.
- China’s Trade Balance arrived at CNY645.47 billion in September, narrowing from the previous figure of CNY732.7 billion. Exports rose 8.4% YoY in September vs. 4.8% in July. The country’s imports advanced 7.5% YoY in the same period vs. 1.7% recorded previously. In US Dollar (USD) terms, China’s Trade Surplus came at $90.45 billion, expanded less than expected $98.96 billion in September, and was down from the previous $102.33.
- The RBA Minutes of its September monetary policy meeting showed on Monday that board members agreed that policy was still a little restrictive but difficult to determine. The RBA Meeting Minutes also noted that economic risks persist, with consumption remaining weak amid softer job and wage growth. Monthly CPI data for housing and services suggest that Q3 inflation may exceed forecasts. The RBA board emphasized that future policy decisions will continue to be cautious and strongly driven by incoming data.
- RBA Governor Michele Bullock remarked last week that services inflation remains somewhat persistent. She acknowledged that second-quarter inflation was slightly above expectations but continues to move in the right direction.
- Australia’s Consumer Inflation Expectations rose to 4.8% in October, up from 4.7% previously, the highest level since June. Growing concerns that inflation may surpass forecasts in Q3 reinforce the cautious outlook surrounding the Reserve Bank of Australia. Traders largely expect the RBA to hold interest rates steady after keeping the Official Cash Rate unchanged at 3.6% in September.
- Reuters, citing a report from The Age on Sunday, said a leaked brief from Australia’s Prime Minister Anthony Albanese’s department revealed that government officials have begun discussions with miners about contributing to a A$1.2 billion ($776.28 million) “critical minerals strategic reserve.” Australia is considering setting minimum prices for critical minerals and providing funding for new rare earth projects under a proposed resources agreement with the United States.
Australian Dollar rises to near 0.6500 despite prevailing bearish bias
The AUD/USD pair is trading around 0.6500 on Wednesday. Technical analysis on the daily chart indicates a prevailing bearish bias as the pair is remaining within a descending channel pattern. Additionally, the 14-day Relative Strength Index (RSI) is still positioned below the 50 level, strengthening a bearish bias.
On the downside, the AUD/USD pair may target the lower boundary of the descending channel around 0.6450. A break below the channel would strengthen the bearish bias and prompt the pair to test the four-month low of 0.6414, recorded on August 21, followed by the five-month low of 0.6372.
The primary barrier lies at the nine-day Exponential Moving Average (EMA) of 0.6532, followed by the 50-day EMA at 0.6553. A break above these levels would improve the short- and medium-term price momentum and lead the AUD/USD pair to test the descending channel’s upper boundary around 0.6590. Further advances above the channel would cause the emergence of the bullish bias and support the pair to explore the region around the 12-month high of 0.6707, recorded on September 17.
AUD/USD: Daily Chart
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.23% | -0.33% | -0.48% | -0.10% | -0.54% | -0.06% | -0.21% | |
| EUR | 0.23% | -0.05% | -0.30% | 0.11% | -0.28% | 0.12% | 0.02% | |
| GBP | 0.33% | 0.05% | -0.22% | 0.20% | -0.22% | 0.17% | 0.13% | |
| JPY | 0.48% | 0.30% | 0.22% | 0.36% | -0.05% | 0.27% | 0.37% | |
| CAD | 0.10% | -0.11% | -0.20% | -0.36% | -0.45% | -0.03% | -0.07% | |
| AUD | 0.54% | 0.28% | 0.22% | 0.05% | 0.45% | 0.39% | 0.35% | |
| NZD | 0.06% | -0.12% | -0.17% | -0.27% | 0.03% | -0.39% | -0.04% | |
| CHF | 0.21% | -0.02% | -0.13% | -0.37% | 0.07% | -0.35% | 0.04% |
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 US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
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.
