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AUD/USD faces pressure around 0.6400 ahead of flash US PMI

  • AUD/USD faces offers near 0.6400 ahead of the preliminary US S&P Global PMI data for February.
  • Investors see Trump’s tariff agenda as less fearful than anticipations.
  • RBA’s Bullock support for maintaining a cautious interest rate cut stance.

The AUD/USD pair faces selling pressure around 0.6400 in North American trading hours on Friday. The Aussie pair weakens as the US Dollar (USD) trades firmly ahead of the release of the flash United States (US) S&P Global Purchasing Managers’ Index (PMI) at 14:45 GMT.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, rises to 106.75 after recovering from the Year-to-day (YTD) low of 106.30, which it posted on Thursday.

Flash PMI report is expected to show that the overall business activity expanded at a faster pace due to strong performance in manufacturing as well as the services sector. The Manufacturing and the Services PMI are estimated to have expanded at a faster pace to 51.5 and 53.0, respectively.

Upbeat private sector PMI data would indicate a strong economic outlook. Such a scenario would force Federal Reserve (Fed) officials to continue maintaining a restrictive monetary policy stance.

However, the outlook of the US Dollar remains uncertain as investors expect US President Donald Trump’s tariff agenda would be less fearful. Till now, the level of tariffs imposed by Trump is significantly lower than what he had vowed in the election campaign. Though Trump has proposed tariffs for a slew of items, investors expect his allies would manage to bargain with him and the impact on the global economy would be much lower than anticipated.

Meanwhile, the Australian Dollar (AUD) weakens against its major peers, except the Japanese Yen (JPY), even though Reserve Bank of Australia (RBA) Governor Michele Bullock reiterated her stance of maintaining caution on further monetary expansion. Bullock warned that the disinflation trend could stall if the RBA cuts interest rates too quickly.

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.

 USDEURGBPJPYCADAUDNZDCHF
USD 0.26%0.21%0.48%0.07%0.30%0.16%0.25%
EUR-0.26% -0.06%0.22%-0.20%0.03%-0.11%-0.02%
GBP-0.21%0.06% 0.29%-0.14%0.09%-0.05%0.04%
JPY-0.48%-0.22%-0.29% -0.38%-0.17%-0.33%-0.23%
CAD-0.07%0.20%0.14%0.38% 0.22%0.08%0.17%
AUD-0.30%-0.03%-0.09%0.17%-0.22% -0.14%-0.06%
NZD-0.16%0.11%0.05%0.33%-0.08%0.14% 0.09%
CHF-0.25%0.02%-0.04%0.23%-0.17%0.06%-0.09% 

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).

On the economic data front, Australia’s Judo Bank Composite PMI expanded at a slightly faster pace to 51.2 from 51.1 in January. The Services PMI advanced to 51.4 from 51.2, while the. Manufacturing PMI rose to 50.6 from the former reading of 50.2.

(This story was corrected on February 24 at 09:00 GMT to say that Michele Bullock reiterated her stance of maintaining caution on further monetary expansion, not his stance.)

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.

Author

Sagar Dua

Sagar Dua

FXStreet

Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.

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