- The Australian Dollar has continued to decline after the People’s Bank of China decided to maintain its loan prime rates.
- US Treasury Secretary Scott Bescent mentioned that discussions between Washington and Beijing have been progressing well.
- Trump stated that the US will not send troops to enforce any potential peace agreements in Ukraine.
On Wednesday, the Australian Dollar (AUD) was hovering at a low against the US Dollar (USD), marking three days of losses. The AUD/USD exchange rate remains under pressure following the People’s Bank of China (PBOC)’s announcement of no changes to its 1- and 5-year loan prime rates, holding steady at 3.00% and 3.50% respectively.
Late Monday, U.S. Treasury Secretary Scott Bescent added that discussions between the US and China are progressing as planned, and he anticipates a rebound in US growth come the fourth quarter. He also remarked on the effectiveness of the current relationship with China, which significantly contributes to tariff revenues for the US.
The AUD/USD pair is facing difficulties, with the US dollar gaining strength amid geopolitical developments. According to CNN, White House press secretary Karoline Leavitt reported plans for a bilateral meeting between Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskyy.
Australian dollars under pressure as Ukraine-Russia peace hopes bolster US dollars
- The US Dollar Index (DXY), which gauges the dollar’s strength against six major currencies, has seen gains for three consecutive days, trading around 98.30 while traders await Federal Reserve Chair Jerome Powell’s address at the Jackson Hole Economic Policy Symposium for insights on upcoming policy decisions.
- On Tuesday, US President Trump clarified that there are currently no US troops positioned to enforce any potential peace agreement in Ukraine. Ongoing negotiations regarding security guarantees are taking place between the US, Europe, and Ukraine.
- Ukrainian President Zelensky stressed the importance of genuine peace late Monday and expressed gratitude for support in security assurances. He also confirmed plans for significant US arms purchases. Additionally, US Secretary of State Marco Rubio announced plans to collaborate with European allies and other countries concerning Ukraine’s security guarantees.
- The Trump administration has expanded its 50% tariffs on steel and aluminum imports, which started on August 18. The latest notice includes 407 new product codes in the US harmonized tariff schedule, with Trump hinting at forthcoming announcements regarding steel tariffs and potential new taxes on semiconductor imports.
- Recent economic data from the US has added to uncertainties surrounding the Federal Reserve’s policy outlook. According to CME’s FedWatch tool, there is an 86.5% probability of a 25 basis point reduction in rates in September.
- In Australia, consumer confidence measured by Westpac rose by 0.6% in July and then increased by 5.7% in August, reaching 98.5. Sentiment has been fluctuating since February 2022, particularly after the Reserve Bank of Australia (RBA) increased rates by a total of 75 basis points since January. Matthew Hassan, head of macro forecasting in Australia, suggested that while long-term consumer pessimism may be waning, further measures might be necessary to sustain momentum. However, he noted that there’s no immediate urgency for policymakers to further adjust rates.
- The RBA has widely anticipated interest rate cuts of 25 basis points on Tuesday, adjusting its official cash rate (OCR) from 3.85% to 3.6% during the August policy meeting.
Australia’s Dollar nears a two-month low of about 0.6400
The AUD/USD is trading near 0.6450 on Wednesday. Analysis of the daily chart indicates weakened short-term momentum for the pair below the nine-day exponential moving average (EMA). The 14-day relative strength index (RSI) also sits below the 50 mark, signaling a bearish outlook.
On the downside, the AUD/USD could test the 0.6419 area, a two-month low set on August 1, followed by a three-month minimum of 0.6372.
This pair aims for the significant hurdle at the nine-day EMA of 0.6486, with a subsequent target at the 50-day EMA of 0.6497. A breakout above these key resistance levels could enhance short- and medium-term momentum, possibly reaching monthly highs from August 14 and aiming for a nine-month peak of 0.6625 seen on July 24.
