AUD/USD gains traction to near 0.6450 as Anthony Albanese wins a second term as Australian PM

AUD/USD edges higher to near 0.6450 in Monday’s early Asian session.
Albanese won a second term as Prime Minister in Federal Election results on Saturday.
US NFP rose 177,000 in April, stronger than expected.

Lallalit Srijandorn FXStreet

The AUD/USD pair gathers strength to around 0.6450 during the Asian session on Monday. The Australian Dollar (USD) strengthens against the Greenback after Australian Prime Minister Anthony Albanese won a second three-year term in Federal Election 2025, making major gains in Federal Election results on Saturday.

Labor Party leader and Prime Minister Albanese claimed a majority in the parliament on Saturday, with over 45% of the votes counted. Albanese became the first leader in decades to secure a second term, defeating opposition leader Peter Dutton of the centre-right Liberal-National coalition. The expectations of policy continuity under Albanese after his re-election for a second term could boost the Aussie in the near term.

The attention will shift to a possible improvement in US-China trade relations. China’s Commerce Ministry said on Friday that Beijing is considering an offer from the US to engage in trade negotiations, a week after US President Donald Trump claimed talks were already underway. However, any signs of escalation between the world’s two largest economies could weigh on the China-proxy Aussie, as China is a major trading partner to Australia.

Data released by the US Bureau of Labor Statistics (BLS) on Friday showed that Nonfarm Payrolls (NFP) in the United States (US) rose by 177,000 in April. This figure followed the 185,000 increase (revised from 228,000) seen in March and came in above the market consensus of 130,000.

Meanwhile, the Unemployment Rate remained unchanged at 4.2% in April, as expected, while the Average Hourly Earnings held steady at 3.8% YoY in the same reported period. The US Dollar (USD) remains weak despite the upbeat US NFP report, as traders are concerned about China tariff headlines. Later on Monday, traders will keep an eye on the US ISM Services Purchasing Managers Index (PMI) for April for fresh impetus.

Australian Dollar FAQs

What key factors drive the Australian Dollar?

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.

How do the decisions of the Reserve Bank of Australia impact the Australian Dollar?

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.

How does the health of the Chinese Economy impact the Australian Dollar?

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.

How does the price of Iron Ore impact the Australian Dollar?

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.

How does the Trade Balance impact the Australian Dollar?

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

Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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