AUD/USD gives up some initial gains as US Dollar strives to gain ground
- AUD/USD surrenders some of its intraday gains as the US Dollar attracts bids, however, its outlook remains uncertain.
- US President Trump postponed proposed 50% tariffs on the EU to July 9.
- This week, investors will focus on the Australian Monthly CPI data for April.
The AUD/USD pair gives back some of its initial gains after posting a fresh six-month high near 0.6540 on Monday. Still, the Aussie pair is up 0.35% around 0.6500 and is expected to remain on the frontfoot on renewed concerns over the safe-haven status of the US Dollar (USD).
The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, attracts bids after posting a fresh monthly low around 98.70 earlier in the day and has rebounded to near 99.00.
Investors have again started doubting the credibility of the US Dollar after United States (US) President Donald Trump suspended his decision to impose 50% flat tariffs on the European Union (EU). His decision came after a telephonic conversation with European Commission President Ursula Von der Leyen.
Another reason behind uncertainty over the US Dollar’s outlook is heightened concerns over the US fiscal deficits. The advancement of a new bill by US President Trump to the Senate, which could increase the national debt by $3.8 trillion over a decade, has accelerated fears of further fiscal imbalances, which is unfavorable for the US's long-term credit issuer rating.
Meanwhile, the Australian Dollar (AUD) outperforms its peers, except the New Zealand Dollar (NZD) in risk-on market conditions. Trump’s EU tariff suspension has increased the risk appetite of investors.
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 | -0.14% | -0.27% | 0.24% | -0.12% | -0.27% | -0.47% | 0.00% | |
| EUR | 0.14% | -0.12% | 0.41% | 0.02% | -0.13% | -0.33% | 0.15% | |
| GBP | 0.27% | 0.12% | 0.23% | 0.14% | -0.01% | -0.21% | 0.29% | |
| JPY | -0.24% | -0.41% | -0.23% | -0.38% | -0.54% | -0.78% | -0.25% | |
| CAD | 0.12% | -0.02% | -0.14% | 0.38% | -0.13% | -0.34% | 0.15% | |
| AUD | 0.27% | 0.13% | 0.00% | 0.54% | 0.13% | -0.24% | 0.29% | |
| NZD | 0.47% | 0.33% | 0.21% | 0.78% | 0.34% | 0.24% | 0.50% | |
| CHF | -0.00% | -0.15% | -0.29% | 0.25% | -0.15% | -0.29% | -0.50% |
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).
On the economic front, investors await the Monthly Consumer Price Index (CPI) data for April, which will be released on Wednesday. The inflation data is estimated to have risen at a moderate pace of 2.3%, compared to 2.4% growth seen in March. Slower-than-projected Australian inflation growth is expected to encourage Reserve Bank of Australia (RBA) officials to lower interest rates again.
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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