Australian Dollar dips on US-China tensions, RBA rate cut expectations
- Australian Dollar loses ground amid escalating US-China trade tensions.
- The AUD weakened as September’s jobs data raised the probability of a November rate cut to 85%, up from 50% earlier in the week.
- The US Dollar weakened amid the ongoing government shutdown and growing expectations of further interest rate cuts.
The Australian Dollar (AUD) declines against the US Dollar (USD) on Friday, extending its losses for the second successive session. The AUD/USD pair loses ground as the AUD could struggle due to escalating United States (US)-China trade tensions. It’s important to note that any shift in China’s economy can influence the Aussie Dollar, given the close trade relationship between China and Australia.
US Trade Representative Jamieson Greer and Treasury Secretary Scott Bessent criticized China’s plans to restrict rare earth exports, calling them “economic coercion” and “a global supply chain power grab.” Bessent warned, “If China wants to be an unreliable partner to the world, then the world will have to decouple.” However, both officials left room for negotiation, expressing uncertainty over whether China would actually follow through with the export controls announced last week, per BBC.
The AUD faced challenges as September’s jobs data quickly boosted the chance of a November cut in the 3.65% cash rate to 85%, from 50% earlier in the week. The Australian Bureau of Statistics (ABS) reported on Thursday that the Employment Change came in at 14.9K in September, against the market expectations of 17K. The previous reading was -11.8K (revised from -5.4K). Meanwhile, the Unemployment Rate rose to 4.5%, jumping to a near four-year high. The figure came in above the market consensus and the previous 4.3%.
US Dollar extends losses due to government shutdown, Fed rate cut bets
- The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, is extending its losses for the fourth successive session and trading around 98.20 at the time of writing. The Greenback declines due to the ongoing US government shutdown and increased likelihood of US interest rate cuts.
- The US federal government shutdown will continue into next week after the Senate once again failed to pass a Republican bill to extend funding and end the stalemate, marking the tenth unsuccessful attempt on Thursday, the 16th day of the impasse.
- US Federal Reserve (Fed) Governor Christopher Waller stated on Thursday that he supports another interest rate cut at this month’s upcoming policy meeting. Meanwhile, the Fed’s newest governor, Stephen Miran, reiterated his call for a more aggressive rate-cut trajectory for 2025 than that favored by his colleagues.
- Federal Reserve Chair Jerome Powell stated on Tuesday that the central bank is on track to deliver another quarter-point interest-rate reduction later this month, even as a government shutdown significantly reduces its read on the economy. Powell highlighted the low pace of hiring and noted that it may weaken further.
- The CME FedWatch Tool indicates that markets are now pricing in nearly a 97% chance of a Fed rate cut in October and an 83% possibility of another reduction in December.
- China’s Consumer Price Index (CPI) declined 0.3% year-over-year (YoY) in September. The market consensus was for a 0.1% decline in the reported period, following a fall of 0.4% in August. Meanwhile, the monthly inflation rose to 0.1%, weaker than the expected 0.2%. China’s Producer Price Index (PPI) fell 2.3% YoY, following a 2.9% fall prior, as expected.
- RBA Assistant Governor (Financial Markets) Christopher Kent spoke at the CFA Society Australia Investment Conference 2025 late Wednesday that financial conditions are less restrictive after recent rate cuts. Kent also added that the cash rate is now within a wide, uncertain neutral range, with the central bank reassessing its outlook with incoming data and risks.
- The Reserve Bank of Australia (RBA) Assistant Governor Sarah Hunter said on Wednesday that recent data has been a little stronger than expected, adding that inflation is likely to be stronger than forecast in the third quarter (Q3). Hunter highlighted that uncertainty about the global outlook remains elevated and stated that the board will adjust policy as appropriate as new information comes to hand. Expected consumer momentum to soften a little in Q3, she added.
- The RBA Minutes of its September monetary policy meeting showed on Monday that board members agreed that policy was still a little restrictive but difficult to determine. The RBA Meeting Minutes also noted that economic risks persist, with consumption remaining weak amid softer job and wage growth. Monthly CPI data for housing and services suggest that Q3 inflation may exceed forecasts. The RBA board emphasized that future policy decisions will continue to be cautious and strongly driven by incoming data.
Australian Dollar remains below 0.6500 due to prevailing bearish bias
AUD/USD is trading around 0.6480 on Friday. Technical analysis on the daily chart suggests an ongoing bearish bias as the pair is moving within a descending channel pattern. Additionally, the 14-day Relative Strength Index (RSI) remains below the 50 level, strengthening the bearish bias.
On the downside, the AUD/USD pair may find its initial support at the lower boundary of the descending channel around 0.6440, followed by the four-month low of 0.6414, recorded on August 21. Further support lies at the five-month low of 0.6372.
The AUD/USD pair may target the primary barrier at the nine-day Exponential Moving Average (EMA) of 0.6515, followed by the 50-day EMA at 0.6548. A break above these levels would improve the short- and medium-term price momentum and lead the pair to test the descending channel’s upper boundary around 0.6580.
AUD/USD: Daily Chart
Australian Dollar Price Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.25% | -0.18% | -0.39% | -0.08% | 0.14% | -0.12% | -0.42% | |
| EUR | 0.25% | 0.08% | -0.16% | 0.19% | 0.45% | 0.13% | -0.17% | |
| GBP | 0.18% | -0.08% | -0.18% | 0.07% | 0.35% | 0.03% | -0.31% | |
| JPY | 0.39% | 0.16% | 0.18% | 0.29% | 0.56% | 0.22% | -0.07% | |
| CAD | 0.08% | -0.19% | -0.07% | -0.29% | 0.23% | -0.06% | -0.40% | |
| AUD | -0.14% | -0.45% | -0.35% | -0.56% | -0.23% | -0.32% | -0.60% | |
| NZD | 0.12% | -0.13% | -0.03% | -0.22% | 0.06% | 0.32% | -0.35% | |
| CHF | 0.42% | 0.17% | 0.31% | 0.07% | 0.40% | 0.60% | 0.35% |
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).
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
Akhtar Faruqui
FXStreet
Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.
