Australian Dollar appreciates as US Dollar remains subdued after a softer inflation report
- The Australian Dollar appreciates as US PCE data reinforced the likelihood of Fed adopting a gradual policy easing in 2025.
- The AUD receives downward pressure as the RBA may begin rate cuts in February.
- CME FedWatch tool suggests a more than 90% probability of the Fed keeping rates unchanged in January.
The Australian Dollar (AUD) steadies following two days of gains on Monday as the US Dollar (USD) remains subdued following the Personal Consumption Expenditures Price Index (PCE) data from the United States (US) released on Friday.
US inflation data for November has strengthened market expectations that the Federal Reserve (Fed) will adopt a slower pace of rate cuts in 2025. According to the CME FedWatch tool, markets now anticipate a more than 90% probability that the Federal Reserve (Fed) will keep interest rates unchanged in January, maintaining the current range of 4.25%–4.50%.
The Reserve Bank of Australia (RBA) is expected to begin cutting its cash rate as early as February, amid mounting signs of an economic slowdown. Traders are preparing for the upcoming release of the Reserve Bank of Australia's (RBA) meeting minutes due on Tuesday, following its decision to hold interest rates steady at 4.35% for the ninth consecutive meeting.
Australian Dollar advances as traders expect Fed to adopt a gradual policy easing in 2025
- US core PCE inflation year-over-year, the Fed’s preferred inflation measure, rose steadily by 2.8%, slower than estimates of 2.9%. The monthly core inflation grew moderately by 0.1%, against estimates of 0.2% and the prior release of 0.3%.
- Australia's Private Sector Credit grew by 0.5% month-over-month in November, aligning with expectations. This followed a 0.6% increase in October, which marked the fastest monthly growth in four months. On an annual basis, Private Sector Credit rose by 6.2% in November, the highest growth rate since May 2023, up slightly from 6.1% in October.
- On Friday, the People’s Bank of China (PBoC) decided to keep its one- and five-year Loan Prime Rates (LPRs) unchanged at 3.10% and 3.60%, respectively, in the fourth quarterly meeting.
- US Gross Domestic Product (GDP) Annualized reported a 3.1% growth rate in the third quarter, surpassing both market expectations and the previous reading of 2.8%. Additionally, Initial Jobless Claims dropped to 220,000 for the week ending December 13, down from 242,000 in the prior week and below the market forecast of 230,000.
- National Australia Bank (NAB) maintained its forecast for the first Reserve Bank of Australia rate cut at the May 2025 meeting, though they acknowledged February as a possibility. NAB's report indicates that the Unemployment Rate is expected to peak at 4.3% before easing to 4.2% by 2026 as the economy stabilizes. The Q4 trimmed mean inflation is projected at 0.6% quarter-on-quarter, with a gradual easing expected, reaching 2.7% by late 2025.
- Reserve Bank of Australia Governor Michele Bullock highlighted the continued strength of the labor market as a key reason the RBA has been slower than other nations to commence its monetary easing cycle.
Australian Dollar hovers near 0.6250, bullish RSI backs a bounce
The AUD/USD pair trades near 0.6250 on Monday, with daily chart analysis indicating a persistent bearish bias as the pair remains within a descending channel pattern. However, the 14-day Relative Strength Index (RSI) hovers above the 30 level, hinting at a potential near-term upward correction.
On the downside, the AUD/USD pair may test the lower boundary of the descending channel, located near the 0.6120 support level.
The AUD/USD pair will likely encounter primary resistance near the nine-day Exponential Moving Average (EMA) at 0.6303, followed by the 14-day EMA at 0.6337. A further hurdle lies at the descending channel’s upper boundary around 0.6380. A decisive breakout above this channel could propel the pair toward the nine-week high of 0.6687.
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 US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.09% | -0.14% | -0.02% | -0.11% | -0.14% | -0.09% | 0.02% | |
| EUR | 0.09% | -0.07% | 0.02% | -0.04% | 0.02% | -0.02% | 0.09% | |
| GBP | 0.14% | 0.07% | 0.06% | 0.04% | 0.10% | 0.07% | 0.19% | |
| JPY | 0.02% | -0.02% | -0.06% | -0.04% | -0.06% | -0.05% | 0.03% | |
| CAD | 0.11% | 0.04% | -0.04% | 0.04% | 0.02% | 0.01% | 0.13% | |
| AUD | 0.14% | -0.02% | -0.10% | 0.06% | -0.02% | -0.04% | 0.08% | |
| NZD | 0.09% | 0.02% | -0.07% | 0.05% | -0.01% | 0.04% | 0.08% | |
| CHF | -0.02% | -0.09% | -0.19% | -0.03% | -0.13% | -0.08% | -0.08% |
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.