- The Australian dollar could benefit as the US dollar faces challenges related to the recent Fed commentary.
- In July, Australia’s private sector credit increased by 0.7%, marking the fastest growth since April.
- Federal Reserve Governor Christopher Waller indicated support for interest rate cuts during the September meeting.
On Friday, the Australian Dollar (AUD) remained stable against the US Dollar (USD), following a three-day rally. There’s a strong chance that the AUD may gain more traction as the USD seems to be faltering, mainly due to the prevailing optimistic sentiment around the Federal Reserve’s policy direction.
Private sector credits in Australia grew 0.7% month-over-month in July, reflecting the fastest increase since April; this follows back-to-back gains of 0.6%. Year-over-year, private credit is up to 7.2%, a notable rise from 6.9% previously, representing the best performance since February 2023.
Furthermore, the AUD got a boost from unexpectedly strong inflation data, which decreased the likelihood of a rate cut by the Reserve Bank of Australia (RBA). In July, the consumer price index surged by 2.8% year-on-year, surpassing the earlier 1.9% increase and the forecasted 2.3%.
According to minutes from the RBA’s August policy meeting, there’s an expectation for more interest rate cuts to come within the next year. However, the timing and extent of these cuts will largely depend on economic data and the global risks involved.
The Australian dollar holds steady as the US dollar awaits PCE inflation data
- The US Dollar Index (DXY), which gauges the USD against six major currencies, is stable around 97.90. The US economy’s growth in the second quarter has lent support to the greenback, with GDP rising 3.3%, outpacing the initial estimate of 3.1% and earlier 3.0% growth.
- Traders are looking forward to the July Personal Consumption Expenditures (PCE) price index being released on Friday. The headline PCE is anticipated to show a 2.6% year-on-year increase, while Core PCE is expected to rise by 2.9%.
- Governor Christopher Waller expressed his willingness to back interest rate cuts at the upcoming September meeting and mentioned the likelihood of further cuts in the next three to six months to safeguard the labor market.
- President Trump made headlines by announcing the removal of Federal Reserve Governor Lisa Cook from her position, a move that could heighten the chances for significant rate cuts as he pressures central banks to lower borrowing costs.
- In retaliation for the Digital Services Tax impacting US tech firms, President Trump threatened additional tariffs and restrictions on advanced technology and semiconductors.
- During the Jackson Hole Symposium, Fed Chair Jerome Powell noted an uptick in risks to the job market but emphasized that inflation remains a significant concern. He stated that the Fed isn’t inclined to tighten its policies based on uncertain employment projections.
- According to the Financial Times, Chinese chip manufacturers are aiming to boost the production of AI processors substantially next year. This comes amidst caution from traders following President Trump’s warning about potential tariffs on Chinese goods if supplies of magnets continue to be restricted. Changes in China’s economy can, of course, impact the AUD, given that the two countries are major trading partners.
- In Australia, private capital expenditures rose by 0.2% in the second quarter, an improvement from the previous drop of 0.1%, but still falling short of the anticipated 0.7% increase.
The Australian Dollar targets a hurdle of 0.6550 near monthly highs
On Friday, AUD/USD is trading around 0.6540. Daily chart analysis indicates the currency pair sits just above the upward trend line, suggesting a bullish outlook. Moreover, it’s trading above the nine-day exponential moving average (EMA), which signifies robust short-term momentum.
This currency pair also aims for monthly highs hit on August 14, as well as a nine-month high of 0.6625 recorded on July 24.
The AUD/USD could initially find support at the 9-day EMA level of 0.6502, followed closely by the 50-day EMA at 0.6498, and a trendline around 0.6490. A break below this critical support zone could shift sentiment negatively, leading to a test of a two-month low at 0.6414 from August 21.
AUD/USD: Daily Charts
Australian dollar prices today
The following rates show the change in the Australian Dollar (AUD) against major currencies, with the AUD being notably strong against the Swiss franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.18% | 0.07% | 0.00% | 0.02% | -0.16% | -0.16% | 0.20% | |
| EUR | -0.18% | -0.10% | -0.17% | -0.15% | -0.28% | -0.33% | 0.00% | |
| GBP | -0.07% | 0.10% | -0.12% | -0.05% | -0.19% | -0.17% | 0.11% | |
| JPY | 0.00% | 0.17% | 0.12% | 0.07% | -0.18% | -0.14% | 0.26% | |
| CAD | -0.02% | 0.15% | 0.05% | -0.07% | -0.20% | -0.16% | 0.16% | |
| AUD | 0.16% | 0.28% | 0.19% | 0.18% | 0.20% | -0.04% | 0.29% | |
| NZD | 0.16% | 0.33% | 0.17% | 0.14% | 0.16% | 0.04% | 0.34% | |
| CHF | -0.20% | -0.01% | -0.11% | -0.26% | -0.16% | -0.29% | -0.34% |
The heatmap illustrates the change rate for each of the major currencies listed. The base currency is identified in the left column, while the currencies up top show the estimated rate. For instance, looking at the AUD against the USD, the box value represents AUD (base) to USD (quote).
