By Areena Fx- Australian Dollar declines after the release of mixed preliminary S&P Global Purchasing Managers Index data.
- Australia’s S&P Global Manufacturing PMI fell to 49.7 and Services PMI rose to 53.1 in October.
- The US Dollar Index rises ahead of September’s Consumer Price Index data due on Friday.
The Australian Dollar (AUD) steadies against the US Dollar (USD) after the release of the preliminary S&P Global Purchasing Managers Index (PMI) on Friday. Traders await key quarterly inflation data for Australia next week that could shape the Reserve Bank of Australia’s (RBA) policy outlook.
The preliminary Australia’s S&P Global Manufacturing Purchasing Managers Index (PMI) fell to 49.7 in October from 51.4 prior. Meanwhile, Services PMI rose to 53.1 in October from the previous reading of 52.4, while the Composite PMI increased to 52.6 in October against 52.4 prior.
RBA Governor Michele Bullock spoke in Sydney but made no comments on monetary policy or the economy. Bullock stated that starting next year, the central bank will consider ways to modernize the interbank settlement system, which processes around A$300 billion ($194.94 billion) in daily transactions and plays a key role in the payments infrastructure, per Reuters.
The AUD could face challenges amid growing bets of a near-term rate cut by the Reserve Bank of Australia (RBA). Australia’s latest employment report threw an unexpected curveball, with the jobless rate climbing to its highest level in nearly four years this September. The surprise spike jolted markets into upping the odds of a 25-basis-point rate cut to 74%, a sharp jump from roughly 50% two weeks prior.
The White House confirmed on Thursday that President Donald Trump will meet Chinese leader Xi Jinping next week, coinciding with another round of high-level trade talks scheduled for this weekend during the ASEAN Summit. Any shift in China’s economic conditions could also affect the Australian dollar (AUD), given the close trade ties between China and Australia.
US Dollar rises ahead of Consumer Price Index data
- The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is gaining ground and trading around 99.00 at the time of writing. Traders would like to adopt a cautious stance before September’s US inflation data due on Friday amid the ongoing government shutdown and resulting data blackout.
- The Greenback draws support after President Trump said on Wednesday that he expects to strike several agreements with Chinese President Xi Jinping during their meeting in South Korea next week. The Trump-Xi discussions are expected to cover a wide range of issues, including US soybean exports, limiting nuclear weapons, and China’s purchases of Russian Oil.
- The US Dollar may struggle as the prolonged US government shutdown delays the key US economic data releases, including Nonfarm Payrolls (NFP), adding uncertainty for financial markets and the Federal Reserve (Fed).
- The US government shutdown has entered its 24th day, marking the second-longest federal funding lapse in history, with no end in sight. The GOP-backed stopgap bill failed to pass in the Senate for a 12th time on Wednesday evening.
- A Reuters poll suggested that 115 out of 117 economists have predicted that the Fed will reduce interest rates by 25 basis points (bps) to 3.75%-4.00% in the monetary policy announcement on October 29. For the year, 83 of 117 economists expect the US Federal Reserve to cut interest rates twice, while 32 anticipate one cut.
- The CME FedWatch Tool indicates that markets are now pricing in nearly a 98% chance of a Fed rate cut in October and a 92% possibility of another reduction in December.
- The People’s Bank of China (PBOC) decided on Monday to keep its one- and five-year Loan Prime Rates (LPRs) unchanged at 3.00% and 3.50%, respectively.
- President Trump and Australian Prime Minister Anthony Albanese signed a USD 8.5 billion critical minerals agreement at the White House on Monday, aimed at securing access to Australia’s abundant rare-earth resources amid China’s tighter export controls. Both nations also committed to investing at least USD 1 billion each over the next six months in mining and processing projects.
Australian Dollar hovers around nine-day EMA above 0.6500
AUD/USD is trading around 0.6510 on Friday. Technical analysis of a daily chart suggests a persistent bearish bias, with the pair trading within a descending channel. The 14-day RSI remains below 50, strengthening the bearish outlook.
On the downside, the AUD/USD pair may navigate the area around the four-month low of 0.6414, followed by the lower boundary of the descending channel around 0.6390. A break below this confluence support zone would strengthen the bearish bias and prompt the pair to test the five-month low of 0.6372.
The AUD/USD pair is hovering around the nine-day Exponential Moving Average (EMA) at 0.6508. A successful break above this level would improve the short-term price momentum and support the pair to test the 50-day EMA at 0.6541, aligned with the descending channel’s upper boundary.
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 weakest against the British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.10% | -0.03% | 0.26% | 0.18% | 0.16% | 0.06% | 0.11% | |
| EUR | -0.10% | -0.12% | 0.16% | 0.09% | 0.07% | -0.03% | 0.02% | |
| GBP | 0.03% | 0.12% | 0.27% | 0.20% | 0.19% | 0.08% | 0.14% | |
| JPY | -0.26% | -0.16% | -0.27% | -0.08% | -0.10% | -0.20% | -0.15% | |
| CAD | -0.18% | -0.09% | -0.20% | 0.08% | -0.03% | -0.11% | -0.08% | |
| AUD | -0.16% | -0.07% | -0.19% | 0.10% | 0.03% | -0.10% | -0.06% | |
| NZD | -0.06% | 0.03% | -0.08% | 0.20% | 0.11% | 0.10% | 0.05% | |
| CHF | -0.11% | -0.02% | -0.14% | 0.15% | 0.08% | 0.06% | -0.05% |
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.