- AUD/USD holds gains as focus shifts to the upcoming release of the RBA Minutes.
- Tensions between the United States and China remain in the spotlight, threatening the demand for the US Dollar.
- Psychological resistance firms at 0.6500, with AUD/USD remaining vulnerable to the key psychological level that is proving difficult to break.
The Australian Dollar (AUD) is trading positively in the early hours of Tuesday's Asian session, while the US Dollar (USD) remains under pressure.
A series of events, including the re-escalation of tensions between the United States and China and renewed threats of tariffs, has led to a significant outflow from the USD, benefiting other currencies, such as the Australian Dollar.
US President Trump, tariffs, and trade wars continue to drive sentiment and demand for the US Dollar.
US President Donald Trump recently announced that tariffs on steel and aluminum imports will double starting Wednesday. This announcement, along with the release of disappointing economic data on Monday, has added further pressure on the Greenback.
The combination of increasing geopolitical risks, a decline in the US Purchasing Managers' Index (PMI) reading for May, and a break of key technical resistance may continue to support the AUD/USD pair on Tuesday.
Markets began the week with a risk-off sentiment on Monday, following several posts from Trump accusing China of violating the temporary trade agreement established on May 12. In that agreement, both nations committed to enhancing their trade relations. Subsequently, the announcement of additional tariffs on global steel and aluminum imports to the US had a positive impact on the AUD/USD pair, pushing it to the significant psychological level of resistance at 0.6500.
Furthermore, the May ISM Manufacturing Purchasing Managers' Index (PMI), which gauges the health of the US manufacturing sector, declined in May. It missed analyst forecasts of 49.5, registering a reading of 48.5, indicating a weakening manufacturing sector.
RBA Meeting Minutes in focus as AUD/USD tests critical zone of resistance
With the Reserve Bank of Australia (RBA) scheduled to release the Meeting Minutes from the May 20 meeting at 01:30 GMT, the release may continue to drive AUD/USD price action. With the Minutes expected to shed light on the economic outlook and near-term Monetary Policy expectations, any surprises, such as the RBA's willingness to slow the pace of rate cuts, may provide an additional catalyst for the AUD/USD pair.
As the 0.6500 level holds firm, Tuesday's developments will be key in determining whether AUD/USD can clear technical resistance or if a correction may be on the horizon, depending on the technical and fundamental developments in both nations.
Economic Indicator
RBA Meeting Minutes
The minutes of the Reserve Bank of Australia meetings are published two weeks after the interest rate decision. The minutes give a full account of the policy discussion, including differences of view. They also record the votes of the individual members of the Committee. Generally speaking, if the RBA is hawkish about the inflationary outlook for the economy, then the markets see a higher possibility of a rate increase, and that is positive for the AUD.
Read more.Next release: Tue Jun 03, 2025 01:30
Frequency: Weekly
Consensus: -
Previous: -
Source: Reserve Bank of Australia
The Reserve Bank of Australia (RBA) publishes the minutes of its monetary policy meeting two weeks after the interest rate decision is announced. It provides a detailed record of the discussions held between the RBA’s board members on monetary policy and economic conditions that influenced their decision on adjusting interest rates and/or bond buys, significantly impacting the AUD. The minutes also reveal considerations on international economic developments and the exchange rate value.
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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