- The Australian dollar has fallen as the RBA could start cutting interest rates in February.
- RBA minutes suggested the board was becoming more confident about inflation. But the risks still existed.
- The US dollar strengthened as Fed policymakers signaled a reduction in interest rate cuts in 2025, citing a slowdown in the disinflationary process.
The Australian dollar (AUD) fell against the US dollar (USD) for the second day in a row on Tuesday following the release of the Reserve Bank of Australia's (RBA) December monetary policy minutes. Trading activity is expected to slow before the Christmas holidays.
RBA minutes showed the board has grown more confident about inflation since its last meeting, although risks remain. The Board stressed the need to keep monetary policy “sufficiently restrictive” until inflation becomes more certain.
The RBA Board also noted that if future data is in line with or below expectations, confidence in inflation will increase and it will be appropriate to start easing policy restrictions. However, if your data is stronger than expected, you may need to maintain a restrictive policy for an extended period of time.
Reserve Bank of Australia Governor Michelle Bullock highlighted the continued strength of the labor market as a key reason why the RBA has been slower to start its monetary easing cycle than other countries.
Australian dollar falls as traders expect the Fed to cut interest rates less next year
- The dollar rallied after falling sharply after Federal Reserve policymakers signaled they would cut interest rates less next year, citing a slowdown in the disinflationary process. However, weak US PCE data has eased inflation concerns and the economic outlook is mixed.
- Markets currently expect a nearly 93% chance that the Federal Reserve will keep interest rates unchanged in January, keeping them in the current range of 4.25% to 4.50%, according to the CME FedWatch tool.
- U.S. durable goods orders were weaker than expected in November, with new orders falling 1.1% compared to expectations of a 0.4% decline. This follows a 0.8% rise in October and an upward revision from the originally announced 0.2% rise.
- The Conference Board's U.S. Consumer Confidence Index fell 8.1 points in December to 104.7. “The recent rebound in consumer confidence was not sustained in December, with the index returning to the midpoint of its two-year range,” said Dana M. Peterson, chief economist at the Conference Board. .
- U.S. households are expressing concern about President-elect Trump's economic policies, with nearly half of respondents worried that tariffs could increase the cost of living. These concerns were further exacerbated by the Federal Open Market Committee's (FOMC) recent outlook, which suggested fewer interest rate cuts in 2025, reflecting caution against a backdrop of persistent inflationary pressures.
- According to Reuters, Cleveland Fed President Beth Hammack said on Friday that she preferred to keep interest rates on hold “until the Fed receives further evidence that inflation is back on track toward its 2% target.”
- Chicago Fed President Austan Goolsby said in an interview with CNBC that he has decided to revise his outlook for 2025 due to uncertainty surrounding Trump's policies after taking office. He previously expected a rate cut of 100 basis points (bps), but now expects it to be lower. cut.
- The U.S. core PCE inflation rate, the Fed's preferred inflation measure, rose steadily year over year to 2.8%, but slower than the 2.9% expected. The monthly core inflation rate grew moderately at 0.1%, compared to the forecast of 0.2% and the previously announced 0.3%.
AUD remains below 0.6250, RSI reflects risks to upside
AUD/USD was trading around 0.6230 on Tuesday, remaining within a descending channel pattern on the daily chart, indicating a sustained bearish bias. The 14-day Relative Strength Index (RSI) has fallen below the 30 level, suggesting that the short-term upward correction may be dissipating.
On the downside, the AUD/USD pair may test the lower end of the descending channel near the 0.6110 support level.
On the upside, the AUD/USD pair faces the first wall at the 9-day exponential moving average (EMA) at 0.6288, followed by the 14-day EMA at 0.6322. The more important hurdle is the upper bound of the descending channel near 0.6370. A decisive break above this channel could open the door for a rally towards a nine-week high of 0.6687.
AUD/USD: daily chart
Australian dollar price today
The table below shows today's percentage change in the Australian Dollar (AUD) against major listed currencies. The Australian dollar was the weakest against the Japanese yen.
| USD | EUR | GBP | JPY | CAD | australian dollar | new zealand dollar | swiss franc | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.09% | 0.02% | -0.02% | 0.08% | 0.25% | 0.14% | 0.07% | |
| EUR | -0.09% | -0.07% | -0.13% | -0.01% | 0.16% | 0.05% | -0.02% | |
| GBP | -0.02% | 0.07% | -0.04% | 0.06% | 0.24% | 0.12% | 0.05% | |
| JPY | 0.02% | 0.13% | 0.04% | 0.11% | 0.32% | 0.17% | 0.13% | |
| CAD | -0.08% | 0.01% | -0.06% | -0.11% | 0.17% | 0.06% | -0.01% | |
| australian dollar | -0.25% | -0.16% | -0.24% | -0.32% | -0.17% | -0.11% | -0.18% | |
| new zealand dollar | -0.14% | -0.05% | -0.12% | -0.17% | -0.06% | 0.11% | -0.07% | |
| swiss franc | -0.07% | 0.02% | -0.05% | -0.13% | 0.00% | 0.18% | 0.07% |
The heat map shows the percentage change between major currencies. The base currency is selected from the left column and the quote currency is selected from the top row. For example, if you select Australian Dollars from the left column and move along the horizontal line to US Dollars, the percentage change displayed in the box represents AUD (Basic)/USD (Quote).
Australian Dollar Frequently Asked Questions
One of the most important factors for the Australian dollar (AUD) is the interest rate level set by the Reserve Bank of Australia (RBA). Australia is a resource-rich country, so another important factor is the price of its largest export, iron ore, which is Australia's largest trading partner, as well as its inflation, growth rate and trade. The health of China's economy is also a factor. balance. Market sentiment is also a factor, with investors taking on riskier assets (risk-on) or seeking safer assets (risk-off), with risk-on being positive for the Australian dollar.
The Reserve Bank of Australia (RBA) influences the Australian dollar (AUD) by setting the level of interest rates at which Australian banks can lend to each other. This affects the level of interest rates throughout the economy. The RBA's main goal is to maintain a stable inflation rate of 2-3% by adjusting interest rates up and down. The Australian dollar is supported by relatively high interest rates compared to other major central banks, and conversely by relatively low interest rates. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former being AUD-negative and the latter AUD-positive.
China is Australia's largest trading partner, so the health of the Chinese economy has a significant impact on the value of the Australian dollar (AUD). When China's economy does well, China buys more raw materials, goods and services from Australia, increasing demand for the Australian dollar and boosting its value. The opposite is true if China's economy is not growing as fast as expected. Therefore, positive or negative surprises in China's growth data often directly impact the Australian dollar and its pairs.
Iron ore is Australia's largest export, accounting for $118 billion annually, according to 2021 data, with China the main destination. Therefore, iron ore prices could be a driver for the Australian dollar. Generally, when the price of iron ore rises, the Australian dollar also rises because aggregate demand for the currency increases. The opposite is true if the price of iron ore falls. Higher iron ore prices tend to increase the likelihood of Australia's trade balance being positive, which is also positive for the Australian dollar.
The balance of trade is the difference between what a country earns from exports and what it pays for imports, and is another factor that can affect the value of the Australian dollar. If Australia produces a highly sought-after export, the country's currency will be deducted from just the surplus demand generated from foreign buyers seeking to buy that export, compared to the amount spent on purchasing the import. value increases. Therefore, a positive net trade balance will cause the Australian dollar to appreciate, while a negative trade balance will have the opposite effect.
