Australia’s Trade Surplus widened to 3,373M MoM in December versus 2,597M (revised from 2,936M) in the previous reading, according to the latest foreign trade data published by the Australian Bureau of Statistics on Thursday.
Further details reveal that Australia’s Exports climbed by 1.0% MoM in December from a fall of 4.0% (revised from -2.9%) seen a month earlier. Meanwhile, Imports fell by 0.8% MoM in December, compared to a decline of 0.2% (revised from 0.2%) seen in November.
Market reaction to Australia’s Trade Balance
At the press time, the AUD/USD pair is up 0.11% on the day to trade at 0.7004.
Australian Dollar Price Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.02% | 0.02% | 0.02% | -0.01% | -0.11% | -0.05% | 0.02% | |
| EUR | -0.02% | -0.00% | 0.00% | -0.03% | -0.13% | -0.06% | 0.00% | |
| GBP | -0.02% | 0.00% | 0.02% | -0.02% | -0.12% | -0.06% | 0.00% | |
| JPY | -0.02% | 0.00% | -0.02% | -0.03% | -0.12% | -0.08% | 0.01% | |
| CAD | 0.00% | 0.03% | 0.02% | 0.03% | -0.10% | -0.04% | 0.03% | |
| AUD | 0.11% | 0.13% | 0.12% | 0.12% | 0.10% | 0.07% | 0.13% | |
| NZD | 0.05% | 0.06% | 0.06% | 0.08% | 0.04% | -0.07% | 0.06% | |
| CHF | -0.02% | 0.00% | -0.00% | -0.01% | -0.03% | -0.13% | -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 Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
This section was published on February 4 at 23.03 GMT as a preview of the Australian Trade Data release.
The Australian Trade Data Overview
The Australian Bureau of Statistics will publish its data for December on Thursday at 00.30 GMT. Australia’s Trade Surplus is expected to widen to 3,300M MoM in December, compared to 2,936M in November.
Trade Balance gives an early indication of the net export performance. If a steady demand in exchange for Australian exports is seen, that would turn into a positive growth in the trade balance, and that should be positive for the AUD.
How could the Australian Trade Data affect AUD/USD?
AUD/USD trades on a negative note on the day in the lead up to the Australian Trade Data. The pair loses ground as the US Dollar (USD) strengthens amid shifting expectations for the Federal Reserve’s (Fed) policy after US President Donald Trump nominated former Fed governor Kevin Warsh as Fed chair last week.
If data comes in better than expected, it could lift the Australian Dollar (AUD), with the first upside barrier seen at the February 3 high of 0.7050. The next resistance level emerges at the January 29 high of 0.7094, en route to the January 26, 2023, high of 0.7142
To the downside, the February 3 low of 0.6945 will offer some comfort to buyers. Extended losses could see a drop to the January 26 low of 0.6906. The next contention level is located at the January 23 low of 0.6834.
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.
