- Aud/USD gains after the release of domestic economic data with an average level on Wednesday.
- The Secretary of the Treasury of the United States Bessent and commercial representative Greer are to meet with the Chinese deputy prime minister Heeng in Geneva.
- It is expected that the Fed will keep the rates later in the session in North America.
The Aud/USD pair continues to rush up during the fourth in a row of sessions, floating around the 0.6510 sign in Wednesday’s Asian commercial hours. The Australian dollar (AUD) finds support from the release of national economic data of the average level and improving global commercial moods.
In April, the AIG industry indicator increased by 5.1 points to -15 according to the season, signaling a slight improvement despite lasting winds in the industrial sector. Challenges, such as global trade uncertainty, currency volatility and the upcoming federal elections are still burdening activities. Meanwhile, the Manufacturing Manufacturing Manufacturing (PMI) managers increased by 3.0 points to -26.7, compared to -29.7 in the previous month.
The sentiment towards the audience has also improved because US-China’s commercial tensions have shown signs of soothing. In significant development, the Secretary of the US Treasury Scott Bessent and the representative of trade Jamieson Greer will meet with the Chinese deputy prime minister Heeng in Geneva at the weekend, marking the first conversations at a high level, since the US imposed tariffs that have transformed into a global commercial dispute.
The Chinese Ministry of Trade stated that after a thorough assessment of the US proposal and considering the global expectations, national interests and industry opinions, Beijing agreed to involvement in the upcoming negotiations.
Looking to the future, investors’ attention is definitely at the decision on the federal reserve rate (FED) on Wednesday. While the FED should maintain indefinite rates, the markets will examine the comments of the Fed Chairman Jerome Powell in terms of all the tips of potential turnover towards reductions in rates in the near future.
Australian dollar questions
One of the most significant factors of the Australian dollar (AUD) is the level of interest rates determined by the Reserve Bank of Australia (RBA). Because Australia is a country affluent in resources, another key driver is the price of its greatest export, iron ore. The health of the Chinese economy, its largest trade partner, is a factor, as well as inflation in Australia, growth rate and commercial balance. Market sentiments-not meaninglessly from whether investors take more risky assets (risk) or are looking for safe-havens (risk)-there is also a factor and a positive risk for AUD.
Bank Reserve Australia (RBA) affects the Australian dollar (AUD), setting the level of interest rates that Australian banks can borrow each other. This affects the level of interest rates in the economy as a whole. The main goal of 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 main central banks support Aud and contrary to relatively low. RBA can also operate quantitative alleviation and tightening to affect credit conditions, with a former negative Aud and the second positive Aud.
China is the largest trading partner in Australia, so the health of the Chinese economy has a gigantic impact on the value of the Australian dollar (AUD). When the Chinese economy is doing well, it buys more raw materials, goods and services from Australia, raising the demand for Aud and increasing its value. On the contrary, when the Chinese economy does not grow as rapid as expected. Therefore, positive or negative surprises in Chinese growth data often have a direct impact on the Australian dollar and its steam.
The ore of iron is the largest export in Australia, which is $ 118 billion a year according to the details of 2021, and China as the main destination. Therefore, the price of iron ore can be the driving force of the Australian dollar. Basically, if the price of iron ore increases, the audience also increases, as the aggregate demand for currency increases. Otherwise, the price of iron ore will fall. Higher prices of iron ore also cause a greater probability of a positive trade balance for Australia, which is also positive for AUD.
The commercial balance, which is the difference between what the country earns on exports compared to what it pays for imports is another factor that can affect the value of the Australian dollar. If Australia produces a highly sought after export, its currency will gain value only from the surplus of demand created by foreign buyers who want to buy exports compared to what it spends on buying imports. Therefore, a positive net trade balance strengthens Aud, with reverse effect if the trade balance is negative.
