- The Australian dollar declines after the People’s Bank of China maintains its one-year loan prime rate at 3.00%.
- The AUD is under additional pressure from ongoing trade tensions between the US and China.
- The US dollar remains steady, supported by strong economic data that offsets any Fed rate cut expectations.
The Australian Dollar (AUD) fell against the US Dollar (USD) on Monday, reversing some gains from the prior session. The AUD/USD exchange rate sits constrained after the People’s Bank of China (PBOC) opted not to adjust its one- and five-year loan prime rates, keeping them at 3.00% and 3.50% respectively. Given the close trading relationship between China and Australia, any economic shifts in China could significantly impact the Australian dollar.
Additionally, trade tensions between the US and China add pressure on the AUD. There’s a deadline for China to solidify a long-term tariff agreement with the United States by August 12, following an earlier transaction intended to halt last month’s tariff hikes.
Traders are treading carefully as they await the release of minutes from the Reserve Bank of Australia’s (RBA) last meeting. Economists anticipate that monetary policy easing could start later this year, with cash rates expected to dip to around 3.1% by early 2026. This outlook is somewhat buoyed by a cautiously optimistic view of the labor market and economic growth. Traders are also looking forward to a speech from RBA Governor Michelle Brock.
Australian dollar slips as robust US economic data supports the dollar
- The US Dollar Index (DXY), which gauges the value of the dollar against six major currencies, hovers around 98.50.
- The University of Michigan’s preliminary consumer sentiment index for July climbed to 61.8 from 60.7 in June, exceeding expectations of 61.5. Improvements were noted both in current conditions and future expectations, reflecting a sense of cautious optimism among US households.
- FOMC Governor Adriana Kugler stated that the US Central Bank shouldn’t cut interest rates for some time, emphasizing the importance of strict monetary policy in managing inflation.
- Meanwhile, San Francisco Fed President Mary Daly described hopes for two interest rate cuts this year as a “rational” outlook, though she warned against prolonged waiting. She anticipates rates will eventually exceed 3%.
- Governor Christopher Waller mentioned his belief that the Central Bank should lower interest targets at the upcoming July meeting, citing elevated economic risks and the need to avoid aggressive actions later.
- Retail sales in the US saw a monthly increase of 0.6% in June, rebounding from a previous decrease of 0.9%, and surpassing the market consensus of 0.1%. Year-on-year, retail sales rose by 3.9%, compared to a 3.3% increase in May.
- The US Producer Price Index (PPI) remained unchanged in June, diverging from market expectations of a 0.2% rise. In contrast, the core PPI increased by 2.6% year-on-year, outpacing a previous forecast of 2.7%.
- The latest Fed Beige Book reveals that overall business activity remains healthy, with inflationary pressures being relatively contained, although underlying cost pressures are building, leading to cautious attitudes from business operators.
- In a recent interview, President Trump mentioned that Fed Chairman Jerome Powell could resign but suggested that doing so might disrupt the market. He also hinted at the possibility of reaching a deal with Europe and mentioned it was premature to discuss Canadian tariffs, while indicating that a tariff agreement with India is nearing.
- Chinese Commerce Minister Wang Wentao noted that while economic and trade relations with the US have faced challenges, they remain significant. He emphasized that mutual interests are the core of US-China commercial relationships, adding that frameworks like the Geneva Agreement have helped stabilize ties and reduce tensions.
- China’s economy grew at an annual rate of 5.2% in the second quarter, slightly below the expected growth of 5.4%. Additionally, the country’s GDP rate rose by 1.1% in the second quarter, surpassing a market expectation of 0.9%. Retail sales surged 4.8% year-on-year in June, exceeding the anticipated 5.6%, while industrial production increased by 6.8% compared to a projected 5.6%.
AUD heads towards 0.6500 after falling from the 9-day EMA
The AUD/USD trades around 0.6510 on Monday. Analysis of the daily chart indicates a prevailing bullish bias as the exchange rate forms a rising channel pattern. However, the 14-day relative strength index (RSI) is beneath the 50 threshold, and the pair is also under the nine-day exponential moving average (EMA), suggesting weaker short-term price momentum.
Looking at key support levels, the 0.6490 mark poses significant resistance for the 50-day EMA. If this level is breached, we could see short-term momentum diminish, potentially pushing the AUD/USD towards the lower limit of 0.6460, which aligns with a three-week low of 0.6454 established on July 17.
The AUD/USD pair might test immediate resistance at the 9-day EMA of 0.6521. A breakout above this level could enhance short-term price momentum and support the pair, bringing it closer to the eight-month high of 0.6595 reached on July 11.
AUD/USD: Daily Charts
Australian dollar prices today
The following table outlines the performance of the Australian Dollar (AUD) against major currencies today. Currently, the Australian dollar shows weakness against the US dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.08% | 0.04% | 0.36% | 0.07% | 0.15% | 0.39% | 0.06% | |
| EUR | -0.08% | 0.04% | 0.29% | -0.02% | 0.04% | 0.14% | -0.06% | |
| GBP | -0.04% | -0.04% | 0.04% | -0.01% | 0.03% | 0.32% | 0.10% | |
| JPY | -0.36% | -0.29% | -0.04% | -0.28% | -0.17% | -0.01% | -0.13% | |
| CAD | -0.07% | 0.02% | 0.00% | 0.28% | 0.14% | 0.33% | -0.06% | |
| AUD | -0.15% | -0.04% | -0.03% | 0.17% | -0.14% | 0.18% | 0.04% | |
| NZD | -0.39% | -0.14% | -0.32% | 0.01% | -0.33% | -0.18% | -0.22% | |
| CHF | -0.06% | 0.06% | -0.10% | 0.13% | 0.06% | -0.04% | 0.22% |
The heatmap displays the rate of change across various major currencies. For example, if you look at AUD against USD, the rate of change reflects the value of AUD per USD.
Australian Dollar FAQ
One major factor impacting the Australian Dollar (AUD) is the interest rate set by the Reserve Bank of Australia (RBA). Given that Australia is rich in resources, the price of iron ore—its biggest export—also plays a significant role. Moreover, Australia’s inflation, its growth rate, and trade balance, as well as market sentiment on whether investors are pursuing riskier assets or looking for safe haven investments, influence the AUD’s performance.
The RBA influences the AUD by controlling the interest rates that banks charge each other. These rates ultimately affect the overall economy. The RBA aims to maintain stable inflation rates of 2-3% by adjusting interest rates. Compared to other major central banks, higher interest rates generally support the AUD, while lower rates usually do the opposite. Along with adjusting interest rates, the RBA can use quantitative easing and tightening to modify credit conditions.
As China is Australia’s biggest trading partner, its economic health significantly affects the AUD’s value. If the Chinese economy is performing well, they tend to import more Australian goods and services, which boosts demand for the AUD and its value. Conversely, if China isn’t growing as anticipated, it often leads to a decrease in the AUD’s value. Such fluctuations in China’s growth data frequently have immediate repercussions on the Australian dollar.
Iron ore is Australia’s largest export, primarily going to China, accounting for approximately $118 billion annually, based on 2021 data. Therefore, the prices of iron ore can significantly influence the Australian dollar. Generally, when iron ore prices rise, so does demand for AUD, leading to an increase in its value. Conversely, falling iron ore prices tend to have the opposite effect, usually resulting in a decline in the AUD’s value.
Trade balances—the difference between a country’s export earnings and import expenditures—also affect the Australian Dollar’s value. If Australia produces highly sought-after exports, the currency gains value from heightened demand from foreign buyers. Thus, a positive net trade balance bolsters the AUD, while a negative balance has an adverse effect.
