- The Australian dollar is experiencing a decline, despite strong monthly CPI figures.
- Traders are feeling cautious after President Trump issued a warning about imposing 200% tariffs on Chinese imports.
- Trump has indicated that White House economist Stephen Milan might be a candidate for Governor Lisa Cook’s position.
The Australian Dollar (AUD) is facing challenges following the release of the monthly Consumer Price Index (CPI) data. The AUD/USD pairing is under pressure as the US dollar (USD) recovers from recent losses.
According to the Australian Bureau of Statistics (ABS), the CPI rose 2.8% in July compared to the previous year, up from a 1.9% increase in June. Analysts had anticipated a lower growth rate of 2.3%. Additionally, construction work in Australia grew by 3% in the second quarter, exceeding the expected 0.8% increase.
Traders, as noted by Reuters, seem wary after Trump’s warning that if China doesn’t supply magnets to the US, it will face a 200% tariff on its goods. Given that Australia and China are important trading partners, fluctuations in the Chinese economy could significantly influence the AUD.
The Australian dollar has stabilized as the US dollar rebounds
- The US Dollar Index (DXY), which assesses the USD against six major currencies, is stabilizing around 98.30. Upcoming economic data to watch includes the US gross domestic product for the second quarter and the Personal Consumption Expenditure Price Index for July.
- President Trump announced early Tuesday that he removed federal governor Lisa Cook from her position on the Federal Reserve Board, marking a historic first in the Fed’s 111-year history.
- Stephen Milan has already been nominated by Trump for a temporary position set to expire in January, hinting that he may also be a candidate for Cook’s permanent role. Meanwhile, David Malpass, a former World Bank president, is also being considered.
- Trump has hinted at imposing “additional tariffs” and technology restrictions in retaliation against a Digital Services Tax affecting American tech firms.
- Federal Reserve Chairman Jerome Powell mentioned at the Jackson Hole Symposium that there are rising risks in the job market, though inflation remains a concern. He indicated that the Fed is uncertain about needing to tighten policy as employment reaches levels considered unsustainable.
- Initial unemployment claims in the US rose to 235K last week, which is above the expected 225K, signaling potential softening in the labor market.
- The preliminary S&P Global US combined PMI for August increased to 55.4 from 55.1, while the manufacturing PMI rose to 53.3, exceeding expectations. The service PMI eased slightly from 55.7 to 55.4 but remained above the expected 54.2.
- Minutes from the Reserve Bank of Australia’s (RBA) August Monetary Policy Conference indicated that board members anticipate further cash rate reductions next year, balancing incoming data and global risks.
The AUD/USD pair tests a resistance zone near 0.6500
The AUD/USD pair is trading around 0.6500 mid-week. Technical analysis shows that the pair is positioned just above a downward channel pattern, hinting at a potential bullish trend. It has also surpassed the nine-day EMA, suggesting some short-term upside momentum.
Should the pair break through the psychological barrier of 0.6500, it may push AUD/JPY closer to monthly highs recorded on August 14.
Support levels are visible around the 50-day EMA at 0.6494, followed by the nine-day EMA at 0.6482. A decline below these points could weaken momentum and push the pair back into its downward trend, with a potential target of the two-month low of 0.6414 set on August 21.
AUD/USD: Daily Charts
Australian dollar prices today
Here is the latest on the AUD’s performance against major currencies. Currently, the Australian dollar is weakest against the US dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.16% | 0.18% | 0.35% | 0.02% | 0.07% | 0.24% | 0.10% | |
| EUR | -0.16% | 0.01% | 0.14% | -0.19% | -0.16% | 0.03% | -0.11% | |
| GBP | -0.18% | -0.01% | 0.16% | -0.15% | -0.07% | 0.06% | -0.07% | |
| JPY | -0.35% | -0.14% | -0.16% | -0.29% | -0.30% | -0.12% | -0.18% | |
| CAD | -0.02% | 0.19% | 0.15% | 0.29% | 0.05% | 0.23% | 0.08% | |
| AUD | -0.07% | 0.16% | 0.07% | 0.30% | -0.05% | 0.19% | 0.05% | |
| NZD | -0.24% | -0.03% | -0.06% | 0.12% | -0.23% | -0.19% | -0.13% | |
| CHF | -0.10% | 0.11% | 0.07% | 0.18% | -0.08% | -0.05% | 0.13% |
The heatmap displays the fluctuation rates of various major currencies, with the base currency listed in the left column and the estimated currency in the top row. For instance, when comparing Australian dollars against US dollars, the rate shown indicates AUD/USD.
Australian Dollar FAQ
One crucial factor influencing the Australian Dollar (AUD) is the interest rates set by the Reserve Bank of Australia (RBA). As a country rich in resources, iron ore prices, which are significant exports, also play a role. Moreover, the state of Australia’s trading partner, China—specifically its inflation, growth rate, and trade balance—affects AUD. Investor sentiment can determine whether the AUD is seen as a risk-on or a safe haven asset.
The RBA influences the AUD through its control of the interest rates that banks charge each other. This, in turn, affects broader economic interest rates. The RBA’s primary aim is to maintain an inflation rate of 2-3% by adjusting interest rates. Relative to other major central banks, higher interest rates bolster the AUD, while lower rates diminish its value. The RBA can also implement quantitative easing and tightening to sway credit conditions.
Being Australia’s largest trading partner, China’s economic health significantly impacts the AUD’s value. A robust Chinese economy means increased demand for Australian raw materials, products, and services, enhancing the AUD’s value. Conversely, disappointing growth figures from China typically lead to a weaker AUD.
Iron ore constitutes Australia’s most significant export, primarily to China, amounting to $118 billion annually as per 2021 data. Therefore, fluctuations in iron ore prices can greatly affect the Australian dollar. Generally, when iron ore prices rise, the AUD appreciates due to increased demand. The opposite is true when prices fall. Higher iron ore prices also tend to improve Australia’s trade balance, further bolstering the AUD.
Trade balances—essentially the difference between a country’s exports and its imports—can influence the AUD’s value. When exports are strong, the currency benefits from the heightened demand from international buyers compared to the costs of imports. A favorable trade balance strengthens the AUD, while a negative balance can have the opposite effect.
