- AUD/USD slips below 0.6480, because July RBA rate reductions drag the Australian dollar
- The American dollar is firm because Trump delays the decision to bomb Iran, but ongoing tensions in the Middle East maintain protected demand.
- Traders from Aud/USD are waiting for Daly’s speech and June PMI data, key weekend events that can manage the direction of next week.
The Australian dollar (AUD) remains under pressure to the American dollar (USD) on Friday, and in the moment of writing Aud/USD trade.
The global risk moods are still getting worse, supporting the protected demand for the US dollar, while domestic weakness and pigeons of expectations from the Australian reserve bank (RBA) additionally weigh the Australian dollar.
Geopolitical uncertainty remains a dominant topic after US President Trump delayed the decision about the US direct involvement in the conflict of Israel and Iran.
While the announcement of a two -week window relieved immediate fears, maintaining variability in the region kept the markets on the edge and maintained the demand for an American dollar.
Meanwhile, a cautious tone of the Federal Reserve (FED) after a June political meeting confirmed the expectations of the gradual rates depending on the given path.
In combination with increased oil -powered oil prices in the Middle East, the Jastrzębie background strengthened the inflationary concerns and strengthened the case by higher rates to remain increased in the long -term perspective.
On the national front, the Australian treasurer Jim Chalmers, speaking on Tuesday, meant enduring structural challenges in the field of efficiency, resistance and sustainable fiscal development. He called for long -term reforms, including tax policy, to strengthen the country’s economic foundation. His comments appear because the markets are more and more the price in the potential reduction of the RBA rate in July, especially among the latest supple data.
The case was to be facilitated in Australia May Employment Report, published on Thursday, which showed a surprise of a 2.5 -carat drop in total work, missing forecasts regarding 25K profit. While full -time employment increased by 38.7 thousand, they were shifted with a decrease in 41.1 thousand. At work part -time.
The unemployment rate remained at the level of 4.1%, but the feeble print dragged Aud/USD to a two -week low level, strengthening the Dovish shift in RBA expectations.
Looking to the future, traders will monitor two key events at the weekend that could affect the direction of Aud/USD.
On Sunday, President San Francisco Fed Mary Dala is to speak at the 100th annual Western Economic Association conference. Her comments on inflation or policy perspective may affect the expectations regarding the September reduction of the FED rate and affect the mood of the American dollar.
Later this evening, markets will focus on the Australian June versions of S&P Global Managers’ Index (PMI), including composite, production and services sectors. As early economic momentum indicators, reports, especially PMI services, will be carefully observed in terms of signs of domestic strength or weakness. Soft readings can strengthen the calls for RBA cutting, while stronger data can offer short-lived support of the Australian dollar.
Australian dollar questions
One of the most vital 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 wealthy 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-no matter how investors take more risky assets (risk) or are looking for protected people (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.
