Australian Dollar steadies amid improved market sentiment, eyes on US-China trade talks
- The Australian Dollar holds ground due to a risk-on mood following the US-EU trade deal.
- The United States and China are expected to extend their tariff truce by another three months.
- Traders await Australian Q2 CPI data due on Wednesday, seeking impetus for the next RBA interest rate decision.
The Australian Dollar (AUD) maintains its position on Monday, after registering losses in the previous two sessions. The AUD/USD pair gained ground following the announcement of a newly established trade agreement between the United States (US) and the European Union (EU).
Traders await further development on the meeting between US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng, scheduled on Monday in Stockholm. The two countries are expected to extend their tariff truce by another three months, according to a source cited by the South China Morning Post (SCMP) on Sunday. It is important to note that any changes in the Chinese economy could impact the AUD as China and Australia are close trade partners.
Australian Q2 CPI data will be eyed on Wednesday as the data is critical for the next Reserve Bank of Australia RBA) interest rate decision. RBA Governor Michele Bullock committed last week to ensure that inflation stays low and stable moving forward. Bullock also noted ongoing uncertainty in the global economy.
Australian Dollar holds gains as US Dollar struggles amid risk-on sentiment
- The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, is holding losses for the third successive session and trading around 97.60 at the time of writing. The Greenback struggles as the market sentiment improves following the trade deal between the US and the EU.
- The United States and European Union reached a framework trade agreement on Sunday that sets 15% tariffs on most European goods, taking effect on August 1. This deal has ended a months-long stand-off, per Bloomberg.
- US Initial Jobless Claims fell to 217,000 last week, down from 227,000 and 221,000 in the prior weeks. This marks the sixth consecutive weekly decline, the longest streak since 2022, underscoring the resilience of the labor market.
- The preliminary S&P Global US Composite Purchasing Managers Index (PMI) data rose to 54.6 in July, up from 52.9 in June, signaling the fastest pace of overall business activity in seven months. The Services PMI rose to 55.2, beating expectations of 53.0 and reflecting solid demand in the services sector. However, the Manufacturing PMI dropped to 49.5, down from a prior reading of 52.0 and below the forecast of 52.5, slipping into contraction territory.
- US Treasury Secretary Scott Bessent noted that a nominee for the next Federal Reserve Chair is likely to be announced in December or January. Bessent emphasized that there is “no rush” to select a successor to current Fed Chair Jerome Powell, noting that the nominee could come from current board members or the heads of the district banks, according to Bloomberg.
- Fed Governor Adriana Kugler said earlier that the US central bank should not lower interest rates "for some time" since the effects of the Trump administration's tariffs are starting to show up in consumer prices. Kugler added that restrictive monetary policy is essential to keep inflationary psychology in line.
- San Francisco Fed President Mary Daly said that expecting two rate cuts this year is a "reasonable" outlook, while warning against waiting too long. Fed Governor Christopher Waller believes that the US central bank should reduce its interest rate target at the July meeting.
- The latest Reserve Bank of Australia (RBA) Meeting Minutes indicated that the board agreed further rate cuts were warranted over time, with attention centered on the timing and extent of easing. The majority believed it was best to await confirmation of an inflation slowdown before easing. Most members felt cutting rates three times in four meetings would not be "cautious and gradual.”
Australian Dollar could find support at nine-day EMA near 0.6550
AUD/USD is trading around 0.6570 on Monday. The daily chart’s technical analysis indicates a prevailing bullish bias as the pair remains within the ascending channel pattern. The 14-day Relative Strength Index (RSI) is positioned above the 50 mark, strengthening the bullish bias. Additionally, the pair remains above the nine-day Exponential Moving Average (EMA), indicating that short-term price momentum is stronger.
On the upside, the AUD/USD pair may target the initial barrier at the eight-month high at 0.6625. A break above this level would support the pair to approach the ascending channel’s upper boundary around 0.6680.
The AUD/USD pair could test its primary support at the nine-day EMA of 0.6560. A break below this level could weaken the short-term price momentum and put downward pressure on the pair to test the 50-day EMA of 0.6508, followed by the ascending channel’s lower boundary around 0.6490.
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 | 0.05% | -0.03% | 0.10% | -0.08% | 0.01% | -0.07% | -0.18% | |
| EUR | -0.05% | -0.12% | 0.09% | -0.14% | -0.04% | -0.13% | -0.24% | |
| GBP | 0.03% | 0.12% | 0.02% | -0.02% | 0.08% | -0.01% | -0.13% | |
| JPY | -0.10% | -0.09% | -0.02% | -0.19% | -0.15% | -0.20% | -0.17% | |
| CAD | 0.08% | 0.14% | 0.02% | 0.19% | 0.07% | 0.01% | -0.10% | |
| AUD | -0.01% | 0.04% | -0.08% | 0.15% | -0.07% | -0.09% | -0.20% | |
| NZD | 0.07% | 0.13% | 0.01% | 0.20% | -0.01% | 0.09% | -0.12% | |
| CHF | 0.18% | 0.24% | 0.13% | 0.17% | 0.10% | 0.20% | 0.12% |
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
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.
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