China continues to face post-pandemic challenges, deflation, and insufficient stimulus for a robust recovery. With over 28 years of experience in the financial industry, Bob has worked with various global rating agencies and multinational banks. Currently he is covering currencies, commodities, alternative asset classes and global equities, focusing mostly on European and Asian markets. Investors should closely monitor central bank signals and economic indicators that may influence AUD/USD trends. Beyond the economic calendar, news updates on the Middle East conflict also need monitoring. Risk aversion could retrigger a flight to safety, impacting commodity currencies, including the Aussie 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. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative. China’s narrower trade surplus with the US, from $27.6 billion in March to $20.46 billion in April, signals some success in rebalancing global trade. As a result, USD/JPY could benefit from stronger Dollar flows and reduced regional uncertainty.
A relief rally added $116b in value to the Australian sharemarket on Thursday following Donald Trump’s decision to pull back from a global trade war. The RBA provides banking services to the Australian Government, its agencies and several overseas central banks and official institutions. The battle between the Australian Dollar (AUD) and the US Dollar (USD) will be one worth watching in 2025, with central banks stealing the limelight. The Reserve Bank of Australia (RBA) has kept interest rates at record highs whilst most of its overseas counterparts started the loosening process. The US Federal Reserve (Fed), on the other hand, has trimmed the benchmark interest rate by 100 bps through 2024 and aims to slow the pace of cuts in 2025.
Reserve Bank of Australia (RBA)
His reaction to August’s Monthly CPI Indicator and his views on inflation and the labor market could influence Aussie dollar demand. The ASX resumed its sell-off on Wednesday with investors selling off the major miners as commodity prices slump. Australia’s share market closed higher for the sixth consecutive trading session, after seesawing throughout the day, on the back of a strong bump in energy and technology stocks.
Monetary policy divergence at play
- The Australian Dollar, on the other hand, surged by nearly 1.5% against the US Dollar, boosted by improving global sentiment and the easing of US-China trade tensions.
- 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.
- Moreover, the chart below shows the Ai Group Index, which highlights ongoing industrial weakness in April and points to soft domestic momentum.
- Its primary duty is to contribute to currency stability, full employment and the economic prosperity and welfare of the Australian people.
- 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.
Combined with the relatively high liquidity of the AUD, this has made the AUD attractive for carry traders looking for higher yields. While both the Federal Reserve (Fed) and the Reserve Bank of vantage fx Australia (RBA) kept rates unchanged, their guidance diverged. Adding to the above, inflation data out of China showed a modest 0.1% rise MoM in April, while the annual figure dipped 0.1%, underscoring persistent disinflationary pressures.
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. 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. On Tuesday, the latest RBA Meeting Minutes affected demand for the Aussie dollar. Board members viewed the current cash rate as appropriate to balance the risks to inflation and the labor market.
- The Australian Dollar has been consolidating in wide ranges against the US Dollar over the past month.
- Beyond the economic calendar, news updates on the Middle East conflict also need monitoring.
- During September’s RBA press conference, RBA Governor Michele Bullock stated that headline inflation may come within the target range but may not reflect underlying inflation.
- China continues to face post-pandemic challenges, deflation, and insufficient stimulus for a robust recovery.
- The Reserve Bank of Australia (RBA) has kept interest rates at record highs whilst most of its overseas counterparts started the loosening process.
- During her press conference, RBA Governor Michele Bullock mentioned that the Board considered a rate hike and stressed that rate cuts are not imminent.
Aussies lose millions in Trump tariff chaos
However, Jerome Powell expressed concern about tariffs disrupting inflation and employment goals. His cautious tone suggested a wait-and-see policy stance, adding to the Dollar’s appeal as a safe-haven asset. During her press conference, RBA Governor Michele Bullock mentioned that the Board considered a rate hike and stressed that rate cuts are not imminent. The local market continued its cautious rally, as trade talks between the two largest economies are set to begin over the weekend. Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination.
EUR/USD jumps to 1.1250 amid intense US Dollar selling
Fed Chair Jerome Powell struck a cautious but hawkish tone, emphasising patience as the Fed gauges incoming data. Meanwhile, RBA Governor Michele Bullock cited sticky inflation and a tight labour market as justification for keeping the cash rate at 4.10%. Markets roared back to life as the US and China hit pause on their escalating trade war, with both sides emphasizing mutual respect and dignity. Investors rushed back into risk assets, betting that the worst might be behind us. The Australian Dollar has been consolidating in wide ranges against the US Dollar over the past month. The chart below shows that the Westpac Consumer Confidence Index rose to 92.1 in May.
Back to monetary policy, investors’ confidence in the Australian currency was further supported by the Reserve Bank of Australia’s (RBA) latest decision to maintain its official cash rate (OCR) at 4.35%. The RBA emphasized its cautious approach, indicating that it is not in a hurry to ease policy with expectations that domestic inflation will remain persistent. Both trimmed-mean and headline CPI inflation are now expected to approach the mid-point of the 2-3% range by late 2026, rather than the previously anticipated June 2026.
A modest decline in open interest points to tentative stabilisation in sentiment. That said, any meaningful progress on the trade front should eventually be a positive for the Aussie, given Australia’s strong economic links with China. For now, investor focus seems to be shifting toward the lack of clarity in the newly announced US-China trade deal—particularly around its extension and what it might mean for a longer-term solution. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you’re a beginner or an expert, find the right partner to navigate the dynamic Forex market. The ASX 200 soared during Tuesday’s trading, but investors are worried it is just a dead cat bounce.
Moreover, the chart below shows the Ai Group Index, which highlights ongoing industrial weakness in April and points to soft domestic momentum. The chart below shows China’s CPI and PPI readings, which indicate slowing inflation. US President Donald Trump’s wild backdown on tariffs has lifted Wall Street and sent the Australian sharemarket shooting up. A surge in energy stocks and Australia’s major miners has driven the ASX 200 higher. Major energy and mining stocks drove the ASX 200 higher, as the United States talks peace with China.
ASX wipes $47bn on Trump tariffs
Australia’s economy and currency are closely tied to China, its largest trading partner. Additionally, the Australian Dollar is often seen as a diversification tool due to its exposure to Asian economies. The AUD/USD currency pair, commonly known as the “Aussie”, represents how many US dollars (the quote currency) are needed to purchase one Australian dollar (the base currency).
The Australian Dollar, on the other hand, surged by nearly 1.5% against the US Dollar, boosted by improving global sentiment and the easing of US-China trade tensions. The market expects that the Federal Reserve (Fed) will maintain its current rate policy through mid-2025. On the other hand, markets have revised their expectations for Australian rate cuts. In legacyfx review addition, weaker exports and 33 consecutive months of industry contraction continue to weigh on the Australian outlook.
A rebound from the long-term support zone of $0.55–$0.56 and a break above $0.58 indicate bullish price action. She quebex highlighted the bank’s vigilance regarding the risks of rising inflation, following the decision to keep interest rates unchanged. Core inflation, which stood at 3.9% last quarter, is expected to decrease to the target range of 2% to 3% by late 2025. The second coming of Donald Trump to the White House anticipates a global Trade War that could fuel inflationary pressures not only in the United States, but also in all major economies.