- Australian Dollar appreciates on weaker US Dollar despite improved US Treasury yields.
- Australian Trade Balance (MoM) increased to 11,027M in February, slightly below the expected 11,500M.
- Chinese Trade Balance USD increased to $125.16B in February, against the expected $103.7B and $75.34B prior.
- Fed Chair Powell indicated that the central bank is prepared to lower borrowing costs "at some point this year."
- February’s US ADP Employment Change increased to 140K from 111K prior, falling short of the expected 150K.
The Australian Dollar (AUD) continues to advance for a second consecutive session on Thursday, largely driven by weakness in the US dollar (USD). This weakness stems from comments made by Federal Reserve (Fed) Chair Jerome Powell during his testimony before the House Financial Services Committee. Powell indicated that the Fed is prepared to lower borrowing costs "at some point this year," following the delivery of the semi-annual Monetary Policy Report. However, the recent escalation of the regional banking crisis in the United States (US) could potentially prompt Powell to expedite this process.
Australia's economy expanded less than expected in the fourth quarter, as shown by the latest Gross Domestic Product (GDP) data released on Wednesday. Moreover, the Trade Balance showed that the surplus fell short than expected. These outcomes limit the gains for the AUD/USD pair and support the case for the Reserve Bank of Australia (RBA) to adopt an easing bias. Furthermore, The Commonwealth Bank of Australia (CBA) has reaffirmed its forecast of 75 basis points in rate cuts for this year following the release of the disappointing GDP figures.
The US Dollar Index (DXY) experienced a decline driven by lower US Treasury yields. Federal Reserve Chair Jerome Powell stated that the US economy is not on the verge of a recession and anticipates inflation to gradually approach the 2% target. Powell emphasized the Fed's commitment to data-driven decisions, stating that interest rates would only be reduced when there is convincing evidence. Further insights from Powell are anticipated during his remarks on Thursday.
Daily Digest Market Movers: Australian Dollar appreciates on improved risk appetite
- Australian Trade Balance (MoM) showed that the surplus increased to 11,027M in February, from 10,743M prior. The market expectation was an increase to 11,500M.
- Aussie Imports (MoM) increased by 1.3% in February, from the previous figure of 4.8%. Monthly Exports grew by 1.6%, exceeding the previous rise of 1.5%.
- Australian Gross Domestic Product (GDP) grew by 0.2% QoQ in the fourth quarter of 2023, slightly below market expectations of no change at 0.3%.
- GDP (YoY) expanded by 1.5%, surpassing the expected 1.4%, but falling short of the previous growth of 2.1%.
- AiG Industry Index reported a print of -14.9 for January, compared to the -27.3 prior.
- Judo Bank Services PMI surged to a ten-month high of 53.1 in February. This increase pushed the index above the 50.0 threshold, indicating expansion, and surpassed the previous reading of 49.1.
- Australian Current Account Balance rose to 11.8 billion in the fourth quarter of 2023, against the expected 5.6 billion and 1.3 billion prior.
- Commerzbank economists anticipate that the Reserve Bank of Australia (RBA) will delay rate cuts, providing support for the Australian Dollar (AUD) in the interim. They do not foresee an imminent slowdown in the Australian economy. However, if clear indications of a slowdown emerge, possibly signaling a recession, the RBA may adjust its monetary policy stance sooner.
- Chinese Trade Balance USD increased to $125.16B against the expected $103.7B for February and $75.34B prior. Imports and Exports (YoY) rose by 3.5% and 7.1%, respectively.
- Former New York Fed economist Steven Friedman noted that Federal Reserve policymakers are likely to remain cautious about cutting interest rates this year due to strong growth and volatile inflation. He expected the possibility of fewer than the three cuts anticipated for 2024.
- Atlanta Federal Reserve (Fed) President Raphael Bostic made headlines on Monday, expressing uncertainty about achieving a soft landing. He does not foresee consecutive rate cuts when they commence but expects two 25-basis point rate cuts in 2024. While inflation is expected to return to the 2% target, Bostic believes it is premature to declare victory.
- According to the CME FedWatch Tool, there is a 5.0% probability of a 25 basis points rate cut in March, while the likelihood of cuts in May and June stands at 19.3% and 55.8%, respectively.
- February’s US ADP Employment Change came in at 140K against the expected 150K, increasing from 111K prior.
- January’s US JOLTS Job Openings fell to 8.863M from December’s figure of 9.026M, falling short of the market expectation of 8.900M.
- ISM Services PMI declined to 52.6 in February, against the forecasted downtick to 53.0 from 53.4.
- Factory Orders (MoM) decreased by 3.6% in January, exceeding the expected fall of 2.9%.
- S&P Global Composite PMI (Feb) increased to 52.5 from the previous reading of 51.4.
- US ISM Manufacturing PMI (Feb) dropped to 47.8 from 49.1, surprisingly missing the market expectation 49.5.
Technical Analysis: Australian Dollar rises to near 0.6570 before a psychological barrier
The Australian Dollar trades around 0.6570 on Thursday. Key resistance is noted near the psychological level of 0.6600, aligned with the 38.2% Fibonacci retracement level of 0.6606. A break above the latter could support the AUD/USD pair to explore the region around the major level of 0.6650. On the downside, the pair meet the major support at 0.6550 followed by the 21-day Exponential Moving Average (EMA) at 0.6539. A break below this level could prompt the AUD/USD pair to test the psychological level of 0.6500 before the previous week’s low at 0.6486.
AUD/USD: Daily Chart
(The story was corrected at 03:20 GMT on March 7 to say “Australian Trade Balance (MoM) increased to 11,027M in February” instead of “reduced to 11,027M” in the second bullet point and second paragraph).
Australian Dollar price in the last 7 days
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies in the last 7 days. Australian Dollar was the strongest against the Swiss Franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.58% | -0.59% | -0.49% | -1.32% | -1.39% | -0.80% | 0.34% | |
| EUR | 0.57% | -0.01% | 0.09% | -0.73% | -0.81% | -0.21% | 0.91% | |
| GBP | 0.59% | 0.01% | 0.09% | -0.72% | -0.80% | -0.21% | 0.93% | |
| CAD | 0.48% | -0.07% | -0.10% | -0.83% | -0.91% | -0.31% | 0.82% | |
| AUD | 1.29% | 0.72% | 0.70% | 0.81% | -0.09% | 0.51% | 1.62% | |
| JPY | 1.37% | 0.81% | 0.78% | 0.87% | 0.07% | 0.60% | 1.71% | |
| NZD | 0.78% | 0.21% | 0.21% | 0.31% | -0.51% | -0.60% | 1.15% | |
| CHF | -0.34% | -0.91% | -0.93% | -0.83% | -1.67% | -1.74% | -1.14% |
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 Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
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.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD retreats toward 1.0850 on modest USD recovery
EUR/USD stays under modest bearish pressure and trades in negative territory at around 1.0850 after closing modestly lower on Thursday. In the absence of macroeconomic data releases, investors will continue to pay close attention to comments from Federal Reserve officials.
GBP/USD holds above 1.2650 following earlier decline
GBP/USD edges higher after falling to a daily low below 1.2650 in the European session on Friday. The US Dollar holds its ground following the selloff seen after April inflation data and makes it difficult for the pair to extend its rebound. Fed policymakers are scheduled to speak later in the day.
Gold climbs to multi-week highs above $2,400
Gold gathered bullish momentum and touched its highest level in nearly a month above $2,400. Although the benchmark 10-year US yield holds steady at around 4.4%, the cautious market stance supports XAU/USD heading into the weekend.
Chainlink social dominance hits six-month peak as LINK extends gains
-637336005550289133_XtraSmall.jpg)
Chainlink (LINK) social dominance increased sharply on Friday, exceeding levels seen in the past six months, along with the token’s price rally that started on Wednesday.
Week ahead: Flash PMIs, UK and Japan CPIs in focus – RBNZ to hold rates
After cool US CPI, attention shifts to UK and Japanese inflation. Flash PMIs will be watched too amid signs of a rebound in Europe. Fed to stay in the spotlight as plethora of speakers, minutes on tap.