- The Australian dollar remains stable despite a decrease in Australia’s trade surplus.
- China’s Caixin Services PMI rose to 51.1 in May, up from 50.7 in April.
- The US dollar is facing difficulties due to disappointing economic data released on Wednesday.
The Australian dollar (AUD) held its ground against the US dollar (USD) on Thursday, staying in positive territory after the domestic trade balance and China’s Caixin Services PMI were released.
Australia’s trade surplus was recorded at 5,413 million in April, a decline from earlier figures. Exports dropped by 2.4% in April, down from a revised 7.2% increase. Imports, on the other hand, rose by 1.1% compared to a revised decrease of 2.4% in March. In contrast, China’s Caixin Services PMI saw an increase from 50.7 in April to 51.1 in May.
The AUD/USD pair gained some status as the US dollar struggled with weaker economic indicators and concern about economic stability. The focus now turns to the upcoming non-farm payroll data on Friday, which might provide further insights into the Federal Reserve’s policy direction.
Stabilization of the Australian dollar as the US dollar attempts a recovery
- The US Dollar Index (DXY), measuring the dollar against six key currencies, was around 98.80 at the time of this report, showing a recovery from earlier losses. The dollar is under pressure due to cautious market sentiments and increasing uncertainty over tariffs, which may impact US growth.
- The ISM Services PMI dropped to 49.9 from 51.6 in May, a disappointing figure against the expected 52.0. Meanwhile, US ADP private sector employment increased by only 37,000 in May, well below the predicted 115,000, following a revised increase of 60,000 in April.
- On Wednesday, US President Donald Trump advocated for Federal Reserve Chairman Jerome Powell to reduce policy rates, stating that the ADP numbers indicated he should act quickly.
- Minneapolis Federal Reserve President Neil Kashkari observed signs of a slowing labor market, emphasizing the ongoing uncertainty surrounding the economy and the need for careful evaluation.
- House Republicans passed a substantial tax and spending package, potentially increasing the US budget deficit, which raises concerns about higher bond yields. Policy experts expect discussions in the Senate as Republicans aim to finalize the legislation by July 4th.
- Trump accused China of breaching a tariff ceasefire agreement made earlier this month, as both countries had agreed to lower mutual tariffs temporarily. China’s Commerce Ministry, however, asserted that they have complied with the agreement.
- The Caixin Manufacturing PMI in China unexpectedly fell to 48.3 from 50.4 in April, not meeting growth expectations. Though the National Bureau of Statistics reported a slight increase to 49.5, the non-manufacturing PMI also saw a drop, which could influence the Australian dollar given the close trade ties between the two nations.
- Australia’s GDP grew by 0.2% quarterly in the first quarter, down from a previous 0.6% increase, and annual growth remained steady at 1.3%, falling short of the expected 1.5%.
- The S&P Global Australia Composite PMI dipped from 51.0 in May to 50.5, indicating marginal growth in business activity, albeit at the slowest pace recorded.
- The S&P Global Australia Services PMI registered at 50.6 in May, indicating consistent expansion but at the slowest rate in six months. The AI Group Manufacturing PMI improved slightly to -23.5 from -26.5, reflecting ongoing uncertainties affecting manufacturers.
- Minutes from the Reserve Bank of Australia’s May Monetary Policy Conference indicated a preference for cautious policy actions, given the significant negative impacts of US trade policies on global prospects.
- RBA Governor Sarah Hunter warned on Tuesday about the broader economic impacts of US tariffs, suggesting potential dampening effects on investment and employment in Australia. Nevertheless, she expressed confidence that Australian exporters are relatively resilient.
The Australian Dollar is testing the 0.6500 barrier as it approaches a seven-month high
The AUD/USD pair hovered around 0.6500 on Thursday, reflecting a sustained bullish trend. The daily chart indicates that the pair operates within a rising channel pattern, displaying strong short-term momentum.
There’s potential for the pair to reach a seven-month high of 0.6537, previously recorded on May 26. Further gains could push it to test the upper boundary of the ascending channel, around 0.6670.
Key support is observed at the 9-day EMA of 0.6468, aligning with the channel’s lower limit at 0.6460. A break below this critical area might diminish bullish sentiments and lead the pair to test the 50-day EMA at 0.6400.
AUD/USD: Daily Charts
Australian dollar prices today
The following table shows the fluctuations of the Australian Dollar (AUD) against other major currencies. Today, it has shown the weakest performance against the New Zealand dollar.
| USD | EUR | GBP | JPY | CAD | aud | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.12% | 0.07% | 0.24% | 0.03% | 0.04% | 0.08% | 0.08% | |
| EUR | -0.12% | 0.00% | 0.13% | -0.05% | -0.07% | -0.12% | -0.01% | |
| GBP | -0.07% | -0.00% | 0.17% | -0.04% | -0.05% | -0.11% | -0.01% | |
| JPY | -0.24% | -0.13% | -0.17% | -0.23% | -0.25% | -0.26% | -0.16% | |
| CAD | -0.03% | 0.05% | 0.04% | 0.23% | -0.03% | -0.05% | 0.05% | |
| aud | -0.04% | 0.07% | 0.05% | 0.25% | 0.03% | -0.06% | 0.06% | |
| NZD | -0.08% | 0.12% | 0.11% | 0.26% | 0.05% | 0.06% | 0.12% | |
| CHF | -0.08% | 0.00% | 0.00% | 0.16% | -0.05% | -0.06% | -0.12% |
The heatmap illustrates the rate of change between each of the major currencies, where the base currency is indicated in the left column.
Australian Dollar FAQ
One key factor influencing the Australian Dollar (AUD) is the interest rate set by the Reserve Bank of Australia (RBA). Being resource-rich, the price of iron ore—which is Australia’s most significant export—also plays a major role. Additionally, the health of the Chinese economy impacts Australia’s inflation, growth rates, and trade balances, alongside general market sentiment.
The RBA impacts the AUD through interest rate adjustments, which dictate lending rates among Australian banks and influence economic conditions. The RBA aims for a stable inflation rate of 2-3% through these adjustments. Compared to other central banks, relatively high interest rates can bolster the AUD.
Since China is Australia’s largest trading partner, its economic health significantly affects the AUD. A booming Chinese economy increases the demand for Australian exports, boosting the AUD’s value. Conversely, if China’s growth falters, the AUD often suffers.
Iron ore is Australia’s primary export, most of which is exported to China, amounting to approximately $118 billion annually. Thus, fluctuations in iron ore prices can sway the AUD significantly; rising prices typically result in a stronger AUD due to higher demand.
Trade balances, reflecting the difference between exports and imports, also affect the AUD. A favorable trade balance strengthens the currency, while a negative balance can weaken it.
