By Areena Fx- Australian Dollar maintains its position following the US-China meeting in South Korea.
- President Trump announced plans to cut tariffs on China to 47%, down from the current 57%.
- The US Dollar loses ground due to uncertainty surrounding the Fed policy stance in December.
AUD/USD gains ground after recovering its recent losses registered in the previous session, trading around 0.6580 during the European hours on Thursday. The Australian Dollar (AUD) holds ground against the US Dollar (USD) following the highly anticipated meeting between US President Donald Trump and China’s President Xi Jinping in South Korea. Any shift in China’s economic conditions could also affect the Australian dollar (AUD), given the close trade ties between China and Australia.
President Trump announced that tariffs on China will be reduced to 47% from the current 57%. Trump added that the rare earth dispute has been resolved, ensuring no further restrictions on China’s rare earth exports. Soybean purchases will begin immediately, and China has agreed to intensify efforts to curb the fentanyl problem. However, Trump noted that not all issues were discussed.
Chinese President Xi Jinping said following the meeting that “two sides should look at the long-term interests of cooperation.” Xi added that China has never tried to challenge, replace anyone. Both sides have good prospects for countering telecom fraud, money laundering, and AI cooperation, he added.
The AUD gained support after Australia’s hotter-than-expected Q3 inflation and August CPI data were released on Wednesday. The stronger readings reduced expectations for near-term rate cuts by the Reserve Bank of Australia (RBA). RBA Governor Bullock noted that the labor market remains somewhat tight, despite the unexpected rise in the unemployment rate.
US Dollar declines over an uncertain Fed policy outlook
- The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, is losing ground after registering gains in the previous session and trading around 98.90 at the time of writing.
- The Federal Reserve (Fed) delivered a widely anticipated 25-basis-point interest rate cut on Wednesday. This marks the second straight interest rate cut from the Fed, albeit with some policymakers making a mental note of a general increase in some inflationary pressures through the second half of the year, but not enough to deter another leg down in interest rates.
- The US Dollar gained ground after the Fed acknowledged it would continue to ease back on Quantitative Easing (QE) practices, with the process of drawing down the Fed’s mortgage-backed asset balance sheet into long-term Treasuries by December 1.
- Fed Chair Jerome Powell stated at the post-meeting press conference that the available data indicate little change in the outlook for employment and inflation since the September meeting. Powell noted that the government shutdown will weigh on economic activity while it continues, but should reverse once it ends. He added that another rate cut in December is far from certain, emphasizing that the path forward remains uncertain.
- The RBA Trimmed Mean CPI for Q3 rose 1.0% and 3.0% on a quarterly and annual basis, respectively. Markets estimated an increase of 0.8% QoQ and 2.7% YoY in the quarter to September. The monthly Consumer Price Index jumped by 3.5% YoY in August, compared to the previous reading of a 3.0% increase. This figure came in hotter than the expectation of 3.1%.
- The US Bureau of Labor Statistics (BLS) reported on Friday that the US Consumer Price Index (CPI) rose 3.0% year-over-year (YoY) in September, following a 2.9% increase in the prior month. This reading came in below the market expectation of 3.1%. Meanwhile, the monthly CPI increased 0.3%, against the 0.4% rise seen in August. The core CPI increased 0.2% month-over-month, compared to the market consensus of 0.3%, while the yearly core CPI was up 3.0% in September.
Australian Dollar tests 0.6600 barrier due to possible bullish shift
The AUD/USD pair is trading around 0.6580 on Thursday. Technical analysis of a daily chart suggests a neutral bias as the pair moves within a rectangle pattern. The pair is trading above the nine-day Exponential Moving Average (EMA), indicating that both short-term price momentum is stronger.
On the upside, the immediate barrier lies at the psychological level of 0.6600, followed by the rectangle’s upper boundary around 0.6630. A break above the rectangle would cause the emergence of the bullish bias and support the AUD/USD pair to explore the region around the 12-month high of 0.6707, which was recorded on September 17.
The primary support lies at the nine-day EMA of 0.6549, aligned with the 50-day EMA at 0.6546. A break below these levels would weaken the short- and medium-term price momentum and prompt the AUD/USD pair to test the lower boundary of the rectangle around 0.6450, followed by the four-month low of 0.6414.
AUD/USD: Daily Chart
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 Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.10% | -0.05% | 0.43% | -0.00% | -0.02% | -0.12% | -0.08% | |
| EUR | 0.10% | 0.04% | 0.55% | 0.09% | 0.08% | -0.03% | 0.01% | |
| GBP | 0.05% | -0.04% | 0.49% | 0.05% | 0.04% | -0.07% | -0.03% | |
| JPY | -0.43% | -0.55% | -0.49% | -0.47% | -0.46% | -0.60% | -0.56% | |
| CAD | 0.00% | -0.09% | -0.05% | 0.47% | -0.00% | -0.13% | -0.09% | |
| AUD | 0.02% | -0.08% | -0.04% | 0.46% | 0.00% | -0.11% | -0.07% | |
| NZD | 0.12% | 0.03% | 0.07% | 0.60% | 0.13% | 0.11% | 0.06% | |
| CHF | 0.08% | -0.01% | 0.03% | 0.56% | 0.09% | 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 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).
Australian Dollar FAQs
What key factors drive the Australian Dollar?
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.
How do the decisions of the Reserve Bank of Australia impact the Australian Dollar?
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.
How does the health of the Chinese Economy impact the Australian Dollar?
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.
How does the price of Iron Ore impact the Australian Dollar?
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.
How does the Trade Balance impact the Australian Dollar?
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.