AUD/USD surges to near 0.6560 on US-China trade deal optimism
- AUD/USD soars to near 0.6560 as the Australian Dollar outperforms.
- Antipodeans gain on hopes that the US and China will reach a trade deal soon.
- Investors await the Australian Q3 CPI and the Fed’s monetary policy announcement.
The AUD/USD pair is up 0.65% to near 0.6560 during the late European trading session on Monday. The Aussie pair strengthens as the appeal of antipodeans has increased on hopes that the United States (US) and China will reach a trade deal soon.
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 US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.14% | -0.32% | -0.15% | -0.14% | -0.69% | -0.32% | -0.06% | |
| EUR | 0.14% | -0.15% | -0.02% | 0.02% | -0.51% | -0.17% | 0.13% | |
| GBP | 0.32% | 0.15% | 0.14% | 0.17% | -0.35% | -0.02% | 0.27% | |
| JPY | 0.15% | 0.02% | -0.14% | 0.01% | -0.55% | -0.16% | 0.11% | |
| CAD | 0.14% | -0.02% | -0.17% | -0.01% | -0.55% | -0.17% | 0.11% | |
| AUD | 0.69% | 0.51% | 0.35% | 0.55% | 0.55% | 0.34% | 0.64% | |
| NZD | 0.32% | 0.17% | 0.02% | 0.16% | 0.17% | -0.34% | 0.27% | |
| CHF | 0.06% | -0.13% | -0.27% | -0.11% | -0.11% | -0.64% | -0.27% |
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).
US-China trade deal optimism accelerated after comments from Treasury Secretary Scott Bessent signaling that Washington won’t proceed with recently announced 100% additional tariffs imposed on Beijing, and the Asian giant would defer its rare earth export controls.
These comments from US Treasury Secretary Bessent came after his meeting with Chinese Premier He Lifeng at the sidelines of the Association of Southeast Asian Nations (ASEAN) summit in Malaysia over the weekend.
Given that the Australian economy relies heavily on its exports to Beijing, the scenario of receding US-China trade frictions is favorable for the Australian Dollar.
On the domestic front, investors await the Q3 Consumer Price Index (CPI) data, which will be released on Wednesday. The inflation data will significantly influence market expectations for the Reserve Bank of Australia’s (RBA) monetary policy outlook.
During the European session, RBA Governor Michelle Bullock said that the central bank intends to bring “inflation down and keep jobs very satisfying”. Bullock expressed confidence that “Unemployment could come down again next month”. In September, the Unemployment Rate surprisingly rose to 4.5%, while economists expected the jobless rate to have remained steady at 4.3%.
Meanwhile, the US Dollar (USD) trades slightly selling pressure as traders remain increasingly confident that the Federal Reserve (Fed) will cut interest rates in its monetary policy announcement on Wednesday. A slower US inflation growth in September has also raised hopes for an interest rate cut on Wednesday.
The US CPI data released on Friday showed that the headline and core inflation rose moderately by 0.3% and 0.2%, respectively, on a monthly basis.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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