Australian Dollar gains ground as US Dollar struggles amid concerns over Fed independence
- The Australian Dollar extends its winning streak for the fifth consecutive day.
- President Trump may announce his preferred candidate to lead the Federal Reserve next year.
- The US Dollar depreciated due to risk-on sentiment following a fragile US-brokered Israel-Iran ceasefire.
The Australian Dollar (AUD) inches higher on Friday, extending its winning streak for the fifth successive session. The AUD/USD pair remains stronger as the US Dollar (USD) struggles due to renewed concerns over the US Federal Reserve’s (Fed) independence.
US President Donald Trump could weaken Fed Chair Jerome Powell’s authority by announcing his preferred candidate to lead the central bank next year. Trump said that he has a list of potential Powell successors down to “three or four people,” without naming the finalists.
The US Dollar also faced challenges amid improving risk appetite, driven by a fragile US-brokered Israel-Iran ceasefire. Traders will likely focus on the developments surrounding US-Iran talks and Middle East conflicts.
US President Donald Trump noted that the United States (US) and Iran would hold a meeting next week but questioned the need for a diplomatic solution on Iran's nuclear program, citing the damage that American bombing had done to key sites, per Bloomberg.
Australian Dollar advances as US Dollar loses ground due to risk-on mood
- The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, is trading at around 97.40 at the time of writing. Traders await the US May Personal Consumption Expenditures (PCE) Price Index data later on Friday.
- US President Donald Trump may announce a successor for Federal Reserve (Fed) Chair Jerome Powell by September or October. Trump might consider former Fed Governor Kevin Warsh and National Economic Council Director Kevin Hassett, according to the Wall Street Journal.
- Chicago Fed President Austan Goolsbee said on Thursday that the political waves are not a factor in decision-making, nor would the naming of a shadow chair, per CNBC.
- Fed Chair Jerome Powell noted on Wednesday that Trump's tariff policies may cause a one-time price hike, but they could also lead to more persistent inflation. The Fed should be careful in considering further rate cuts.
- Fed’s Powell highlighted during his testimony before the congressional budget committee on Tuesday, strengthening his case for delaying rate cuts, likely until sometime in the fourth quarter. Powell added, “When the time is right, expect rate cuts to continue.” He also said that data suggests that at least some of the tariffs will hit consumers and will start to see more tariff inflation starting in June.
- Minneapolis Fed President Neel Kashkari reaffirmed the Fed's wait-and-see stance on potential tariff impacts on inflation and the broader economy in general before making any hard decisions on moving interest rates.
- Kansas City Fed President Jeff Schmid said early Wednesday that the central bank should wait to see how uncertainty surrounding tariffs and other policies impacts the economy before adjusting interest rates. Schmid added that the resilience of the economy gives us the time to observe how prices and the economy develop, per Bloomberg.
- A US intelligence report indicated that US strikes on Iranian nuclear sites have set back Tehran's program by only a matter of months, per Reuters. Additionally, Iranian Foreign Minister Abbas Araghchi said that the country's nuclear program continues, per the local news agency Al Arabiya.
- China’s state planner, the National Development and Reform Commission (NDRC), said on Thursday, they are “confident in minimizing uncertainty and negative impact of external shocks.” They also noted that “With policy implementation and introduction, we are confident and capable of minimizing the adverse impacts from external shock.”
- China’s Premier Li Qiang made some encouraging comments on the economic outlook in his appearance on Thursday. Li said that the domestic economy shows strong resilience and development potential. China’s economic data shows stability in Q2, he added.
- Australian Bureau of Statistics (ABS) reported vacancies rose by 2.9% in the three months to May, partly recovering from a 4.3% decline in the previous quarter ended February. Australia’s labor demand remained resilient despite a soft economy as job vacancies rebounded in the May quarter, driven by openings in the construction and professional sectors. However, job openings stood at 339,400 in May, down 2.8% from a year earlier, the smallest annual decline in the past two years.
Australian Dollar hovers around 0.6550 support near seven-month highs
AUD/USD is trading around 0.6550 on Friday. The daily technical analysis indicates a persistent bullish bias as the pair remains within the ascending channel pattern. The 14-day Relative Strength Index (RSI) is positioned above the 50 mark. Additionally, the pair rises above the nine-day Exponential Moving Average (EMA), indicating that short-term price momentum is stronger.
On the upside, the AUD/USD pair is testing the seven-month high of 0.6552, which was recorded on June 16, followed by the upper boundary of the ascending channel around 0.6570.
The nine-day EMA at 0.6511 is poised to act as primary support. A break below this level would weaken the short-term price momentum and put downward pressure on the AUD/USD pair to test the lower boundary of the ascending channel around 0.6450, aligned with the 50-day EMA at 0.6447.
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 Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.06% | -0.06% | -0.06% | -0.04% | -0.16% | -0.15% | 0.04% | |
| EUR | 0.06% | -0.05% | -0.02% | 0.00% | -0.13% | -0.22% | 0.05% | |
| GBP | 0.06% | 0.05% | 0.06% | 0.03% | -0.08% | -0.12% | 0.19% | |
| JPY | 0.06% | 0.02% | -0.06% | 0.02% | -0.11% | -0.26% | 0.17% | |
| CAD | 0.04% | -0.01% | -0.03% | -0.02% | -0.09% | -0.23% | 0.12% | |
| AUD | 0.16% | 0.13% | 0.08% | 0.11% | 0.09% | -0.10% | 0.26% | |
| NZD | 0.15% | 0.22% | 0.12% | 0.26% | 0.23% | 0.10% | 0.35% | |
| CHF | -0.04% | -0.05% | -0.19% | -0.17% | -0.12% | -0.26% | -0.35% |
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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