- The Australian dollar continues to rise despite strong economic data from China released on Friday.
- China's GDP grew by 5.4% year-on-year in the fourth quarter of 2024, after reporting a 4.6% expansion in the third quarter.
- U.S. retail sales rose 0.4% month-on-month in December, compared to expectations for a 0.6% increase.
The Australian dollar (AUD) lost its daily gains against the US dollar (USD) on Friday. However, the AUD/USD pair rose on the back of solid economic data from China. China's gross domestic product (GDP) grew by 5.4% year-on-year in the fourth quarter of 2024, after reporting a 4.6% expansion in the third quarter. This data was significantly higher than the market consensus of 5% during the reporting period.
China's GDP rate increased by 1.6% quarter-on-quarter in the fourth quarter of 2024, compared to an increase of 0.9% in the previous quarter. This number matched expectations of 1.6%. Annual retail sales rose 3.7% in December, versus 3.5% expected and 3.0% previously, and industrial production rose 6.2%, versus 5.4% expected and 5.4% in November.
The National Bureau of Statistics (NBS) shared its outlook on the economy at a press conference on Friday. NBS emphasized that economic management continues to face significant difficulties and challenges. He pointed out that the impact of changes in the external environment is increasing and that domestic demand remains insufficient.
Australia's seasonally adjusted unemployment rate rose to 4.0% in December from 3.9% in November, in line with market expectations. The number of employees in December increased by 56,000, up from 28,200 in November (revised from 35,600) and significantly exceeded market expectations of 15,000.
Björn Jarvis, head of labor statistics at ABS, highlighted key data points: “The employment-to-population ratio rose 0.1 percentage points to a new record of 64.5%, which is 0.5% higher than a year ago. 2.3 percentage points,” he said. Both employment and unemployment increased by a point above pre-COVID-19 levels, further increasing the participation rate. This reflects the proportion of the population who are employed or actively looking for work. ”
Despite the Fed's dovish policy, the US dollar strengthens and the Australian dollar falls
- The US Dollar Index (DXY), which tracks the performance of the US dollar against six major currencies, has snapped a four-day losing streak and is trading around 109.10 at the time of writing. However, the dollar faced challenges as weak US retail sales and persistent inflation data raised market expectations that the Federal Reserve would cut interest rates twice this year.
- Increasing expectations that the Fed will cut interest rates twice this year has pushed U.S. Treasury yields lower, with two-year and 10-year Treasuries currently at 4.23% and 4.60%, respectively. Both yields are expected to fall by more than 3% in a week.
- U.S. retail sales in December increased 0.4% month over month to $729.2 billion. This figure was weaker than the 0.6% rise expected by the market and lower than the previous 0.8% rise (revised from 0.7%).
- Chicago Fed President Austan Goolsby said Thursday that he has become increasingly confident over the past few months that the job market is stabilizing near full employment rather than worsening further, Reuters reported. said.
- The US consumer price index rose 2.9% year-on-year in December, up from 2.7% in November and in line with market expectations. The CPI increased by 0.4% last month, following a 0.3% increase in the previous month.
- U.S. core CPI, which excludes volatile food and energy prices, rose at an annualized rate of 3.2% in December, slightly below November's numbers and analysts' expectations of 3.3%. December 2024 Core CPI increased 0.2% Monthly.
- On Wednesday, Scott Bessent, President Donald Trump's nominee for Treasury Secretary, emphasized the importance of maintaining the U.S. dollar as the world's reserve currency for the nation's economic stability and future prosperity. “Productive investments that grow the economy must be prioritized over wasteful spending that drives inflation,” Bessent said, according to Bloomberg.
- The U.S. Federal Reserve reported modest to moderate growth in economic activity across 12 Federal Reserve districts from late November to December in its latest Beige Book survey released Wednesday. . Personal consumption increased moderately, driven by a better-than-expected year-end sales season. However, overall manufacturing activity fell slightly as some manufacturers stocked up on inventory in anticipation of higher tariffs.
Technical analysis: Australian dollar remains above 0.6200 support near 14-day EMA
The AUD/USD pair was hovering around 0.6220 on Friday, trying to break out of the descending channel on the daily chart. A successful breakout would reduce the prevailing bearish bias. The 14-day Relative Strength Index (RSI) is also trending upward towards the 50 level, suggesting potential recovery momentum.
The AUD/USD pair will soon encounter resistance at the upper end of the descending channel, around 0.6220.
On the downside, the first support is at the 14-day exponential moving average (EMA) at 0.6213, followed by the 9-day EMA at 0.6206. A more substantial support level is near the lower end of the descending channel, near the 0.5920 mark.
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 US dollar.
| USD | EUR | GBP | JPY | CAD | australian dollar | new zealand dollar | swiss franc | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.11% | 0.14% | 0.30% | 0.07% | 0.10% | 0.31% | 0.11% | |
| EUR | -0.11% | 0.02% | 0.19% | -0.05% | -0.02% | 0.20% | -0.01% | |
| GBP | -0.14% | -0.02% | 0.13% | -0.07% | -0.04% | 0.18% | -0.03% | |
| JPY | -0.30% | -0.19% | -0.13% | -0.21% | -0.20% | 0.01% | -0.19% | |
| CAD | -0.07% | 0.05% | 0.07% | 0.21% | 0.02% | 0.24% | 0.04% | |
| australian dollar | -0.10% | 0.02% | 0.04% | 0.20% | -0.02% | 0.21% | -0.03% | |
| new zealand dollar | -0.31% | -0.20% | -0.18% | -0.01% | -0.24% | -0.21% | -0.20% | |
| swiss franc | -0.11% | 0.00% | 0.03% | 0.19% | -0.04% | 0.03% | 0.20% |
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.
