AUD/USD gains sharply to near 0.6500 as Trump hints optimism on US-China trade deal
- AUD/USD climbs to near 0.6500 as the Australian Dollar outperforms its peers.
- The RBA is expected to cut interest rates next week.
- US President Trump is expected to announce Fed Kugler’s replacement this week.
The AUD/USD pair jumps to near 0.6500 during the European trading session. The Aussie pair strengthens as antipodeans outperform its peers amid optimism that the United States (US) and China will reach a tariff deal soon.
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.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.30% | -0.10% | 0.03% | -0.10% | -0.49% | -0.39% | -0.15% | |
| EUR | 0.30% | 0.18% | 0.29% | 0.19% | -0.10% | -0.14% | 0.15% | |
| GBP | 0.10% | -0.18% | 0.14% | 0.02% | -0.30% | -0.34% | 0.01% | |
| JPY | -0.03% | -0.29% | -0.14% | -0.12% | -0.54% | -0.51% | -0.11% | |
| CAD | 0.10% | -0.19% | -0.02% | 0.12% | -0.29% | -0.34% | -0.00% | |
| AUD | 0.49% | 0.10% | 0.30% | 0.54% | 0.29% | -0.04% | 0.30% | |
| NZD | 0.39% | 0.14% | 0.34% | 0.51% | 0.34% | 0.04% | 0.34% | |
| CHF | 0.15% | -0.15% | -0.01% | 0.11% | 0.00% | -0.30% | -0.34% |
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).
US President Donald Trump signaled in an interview with CNBC on Tuesday that trade discussions with China are going well and both economies can reach trade agreement soon. “We’re getting along with China very well,” Trump said. He further added that he could have a meeting with Chinese leader Xi Jining this year.
Given that the Australian economy relies heavily on its exports to China, the scenario of healthy trade relations between Washington and Beijing is favorable for the Australian Dollar (AUD).
On the domestic front, market experts seem confident that the Reserve Bank of Australia (RBA) will cut interest rates in its policy meeting next week.
Analysts at Capital Economics said in a report that the RBA will reduce its Official Cash Rate (OCR) by 25 basis points (bps) to 3.6%. on Tuesday as inflation is trending lower and is now within "striking distance of the midpoint of the RBA’s 2-3% target".
Meanwhile, the US Dollar (USD) trades broadly stable, while investors await the entry of new member in the Federal Open Market Committee (FOMC). US President Trump confirmed on Tuesday that he will announce the replacement of Federal Reserve (Fed) Adriana Kugler this week, who resigned on Friday.
During the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades flat around 98.80.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
Author
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.
