- The Australian Dollar extends gains due to the Israel-Iran ceasefire.
- Australia’s Monthly Consumer Price Index increased by 2.1% YoY in May, against the expected 2.3% rise and the 2.4% prior.
- Fed Chair Powell advocated for delaying rate cuts, likely until sometime in the fourth quarter.
The Australian Dollar (AUD) extends its gains for the third successive session on Wednesday. The AUD/USD pair remains stronger following the release of Australia’s Monthly Consumer Price Index (CPI), which climbed by 2.1% year-over-year in May. The inflation came in softer than market expectations of a 2.3% rise and the 2.4% prior, easing after remaining consistent for three successive months.
Australia’s softer inflation data, along with recent weaker-than-expected GDP figures, reinforces expectations of the Reserve Bank of Australia’s (RBA) rate cut in July. Markets are now pricing in an 80% probability of a 25 basis points (bps) rate cut by the RBA next month. Traders are also expecting a total of 73 bps interest rate cuts by the end of the year.
The AUD also receives support from improved risk appetite amid easing tensions in the Middle East. US President Donald Trump announced that a ceasefire between Iran and Israel had taken effect, raising hopes for an end to the 12-day conflict. However, caution lingered amid uncertainty over the ceasefire’s durability. Traders will likely focus on the potential revival of nuclear talks and the fate of Iran’s enriched uranium.
Australian Dollar advances as US Dollar remains subdued amid risk-on mood
- The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, is trading lower at around 97.90 at the time of writing. Investors will keep an eye on Federal Reserve (Fed) Chair Jerome Powell’s testimony later on Wednesday.
- Fed Chair Powell highlighted during his testimony before the congressional budget committee on Tuesday, strengthening his case for delaying rate cuts, likely until sometime in the fourth quarter. Powell added, “When the time is right, expect rate cuts to continue.” He also said that data suggests that at least some of the tariffs will hit consumers and will start to see more tariff inflation starting in June.
- Minneapolis Fed President Neel Kashkari reaffirmed the Fed’s wait-and-see stance on potential tariff impacts on inflation and the broader economy in general before making any hard decisions on moving interest rates.
- Kansas City Fed President Jeff Schmid said early Wednesday that the central bank should wait to see how uncertainty surrounding tariffs and other policies impacts the economy before adjusting interest rates. Schmid added that the resilience of the economy gives us the time to observe how prices and the economy develop, per Bloomberg.
- Fed’s Powell reaffirmed his stance that policymakers should avoid rushing to adjust interest rates, contradicting recent comments from Fed Governors Christopher Waller and Michelle Bowman, who said that the two would be open to lowering rates as soon as July.
- Fed’s Vice Chair for Supervision Michelle Bowman noted on Monday that the time to cut interest rates is getting nearer as risks to the job market may be on the rise. Bowman also highlighted that inflation appears to be on a sustained path back to 2% and she is less concerned that tariffs will cause an inflation problem. Fed Governor Christopher Waller noted on Friday that the US central bank could start easing monetary policy as soon as next month, signaling flexibility amid global economic uncertainty and rising geopolitical risks.
- A US intelligence report indicated that US strikes on Iranian nuclear sites have set back Tehran’s program by only a matter of months, per Reuters. Additionally, Iranian Foreign Minister Abbas Araghchi said that the country’s nuclear program continues, per the local news agency Al Arabiya.
- S&P Global Australia Manufacturing Purchasing Managers Index remained consistent at a 51.0 reading in June. Meanwhile, the Services PMI edged higher to 51.3 from the previous reading of 50.6, while the Composite PMI improved to 51.2 in June from 50.5 prior.
Australian Dollar moves above 0.6500, nine-day EMA
AUD/USD is trading around 0.6510 on Wednesday. The technical analysis of the daily suggests a persistent bullish bias as the pair remains within the ascending channel pattern. The 14-day Relative Strength Index (RSI) remains slightly above the 50 mark. Additionally, the pair has moved above the nine-day Exponential Moving Average (EMA), indicating that short-term price momentum is strengthening.
On the upside, the AUD/USD pair may explore the region around the seven-month high of 0.6552, which was recorded on June 16, followed by the ascending channel’s upper boundary around 0.6570.
The immediate support appears at the nine-day EMA of 0.6486. A break below this level would weaken the short-term price momentum and put downward pressure on the AUD/USD pair to test the lower boundary of the ascending channel around 0.6450, aligned with the 50-day EMA at 0.6438.
AUD/USD: Daily Chart
Australian Dollar PRICE Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.07% | -0.06% | 0.09% | 0.11% | -0.13% | -0.40% | -0.10% | |
| EUR | 0.07% | 0.03% | 0.15% | 0.15% | -0.11% | -0.34% | -0.03% | |
| GBP | 0.06% | -0.03% | 0.14% | 0.14% | -0.09% | -0.37% | -0.03% | |
| JPY | -0.09% | -0.15% | -0.14% | -0.04% | -0.21% | -0.46% | -0.16% | |
| CAD | -0.11% | -0.15% | -0.14% | 0.04% | -0.17% | -0.38% | -0.17% | |
| AUD | 0.13% | 0.11% | 0.09% | 0.21% | 0.17% | -0.33% | 0.06% | |
| NZD | 0.40% | 0.34% | 0.37% | 0.46% | 0.38% | 0.33% | 0.33% | |
| CHF | 0.10% | 0.03% | 0.03% | 0.16% | 0.17% | -0.06% | -0.33% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
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