The Australian Dollar Gains Ground Amid Mixed Economic Signals
- Private capital expenditures in Australia increased by 0.2% in the second quarter, falling short of the anticipated 0.7% growth.
- The AUD has gained support following unexpected inflation data, easing expectations for a Reserve Bank of Australia (RBA) rate cut.
- The CME FedWatch tool indicates there’s an 88% chance or higher for a 25 basis point reduction in the Federal Reserve’s rate in September.
On Thursday, the Australian Dollar (AUD) managed its third straight session of gains. This uptick comes after the release of the latest capital expenditure figures, which showed a 0.2% increase for the second quarter. As the US Dollar (USD) struggles amid uncertainties regarding the Federal Reserve, AUD/USD has managed to hold its position.
Additionally, the AUD received a boost from Australia’s higher-than-expected inflation data, which has lowered the likelihood of an interest rate cut by the RBA. For instance, the consumer price index climbed by 2.8% year-on-year in July, surpassing previous growth expectations of 1.9% and 2.3%.
In related news, Chinese chip manufacturers aim to triple their production of AI processors by next year, according to the Financial Times. Traders are on edge following a warning from President Trump about possible tariffs—up to 200%—on Chinese products if Beijing doesn’t supply magnets as promised. Considering the close trading relationship between China and Australia, this economic shift could have implications for the AUD.
The AUD’s Forward Movement Against a Weighed Down USD
- As of now, the US Dollar Index (DXY), which measures the USD against six major currencies, remains steady, hovering around the 98.10 mark as traders prepare for Thursday’s second half. Focus will soon turn to the Personal Consumption Expenditure (PCE) Price Index Data, an important inflation metric for the Fed.
- Tuesday morning, President Trump announced the dismissal of federal governor Lisa Cook from her role on the board of directors—marking a historic first in the 111 years of the Fed’s history. This action may heighten the possibility of significant rate cuts, as Trump continues to pressure central banks to lower borrowing costs.
- Current predictions via the CME FedWatch tool suggest traders see an 88% probability of at least a quarter-point rate reduction in the upcoming Fed meeting.
- In another developing situation, Trump has nominated Stephen Milan, a White House economist, for a temporary role that will expire in January, hinting that Milan may be a contender for Cook’s position. Reports also suggest former World Bank president David Malpass could be another candidate.
- Trump has also warned of “additional tariffs and restrictions” on advanced technology and semiconductors in response to the Digital Services Tax impacting American tech companies.
- During the Jackson Hole Symposium, Federal Reserve Chairman Jerome Powell commented on rising risks to the job market but emphasized that inflation remains a pressing issue, leaving decisions in flux. He mentioned that the Fed doesn’t see a need to tighten policy based on uncertain job market estimates.
- Minutes from the RBA’s August Monetary Policy Conference suggested that board members concluded further cuts to cash rates may be necessary next year, with the pace determined by incoming data and global risks.
AUD/USD Hovering Above 0.6500, EMAS
On Thursday, the AUD/USD pair is trading around 0.6510. A technical look at the daily charts indicates that the pair is slightly above an ascending trend line, hinting at a potential bullish trend. Furthermore, it’s trading above the nine-day exponential moving average (EMA), suggesting stronger short-term price momentum.
On the flip side, the AUD/JPY pair reached 0.6568—its highest this month, with a previous peak of 0.6625 observed on July 24th.
Immediate support sits at the psychological level of 0.6500, along with the 50-day EMA at 0.6495 and the 9-day EMA at 0.6490. Falling below these thresholds could weaken price momentum, testing the upward trend line at around 0.6480, which would apply more downward pressure. A further drop could mean revisiting the two-month low of 0.6414 recorded on August 21.
AUD/USD: Daily Charts
The following table indicates the daily price changes for the Australian Dollar (AUD) against major currencies, showing its strongest performance against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.02% | -0.05% | -0.24% | -0.02% | -0.04% | 0.03% | -0.15% | |
| EUR | -0.02% | -0.03% | -0.27% | -0.04% | -0.03% | 0.03% | -0.15% | |
| GBP | 0.05% | 0.03% | -0.22% | 0.03% | 0.00% | 0.08% | -0.10% | |
| JPY | 0.24% | 0.27% | 0.22% | 0.25% | 0.17% | -0.00% | 0.13% | |
| CAD | 0.02% | 0.04% | -0.03% | -0.25% | -0.03% | 0.07% | -0.05% | |
| AUD | 0.04% | 0.03% | -0.00% | -0.17% | 0.03% | 0.07% | -0.11% | |
| NZD | -0.03% | -0.03% | -0.08% | 0.00% | -0.07% | -0.07% | -0.17% | |
| CHF | 0.15% | 0.15% | 0.10% | -0.13% | 0.05% | 0.11% | 0.17% |
The heatmap shows the rate of change for these major currencies. The base currency is from the left column, and the estimated currency is from the top row. For example, choosing Australian dollars from the left and moving to US dollars indicates AUD/USD’s rate of change.
