Reserve Bank of Australia (RBA) Governor Michele Bullock is speaking at the press conference, following the announcement of the December monetary policy decision on Tuesday.
Bullock is responding to questions from the media as part of a new reporting format for the central bank starting this year.
The RBA maintained the benchmark interest rate at 4.35% for the ninth straight meeting earlier this Tuesday but signalled a dovish pivot.
Key quotes
Need to think carefully on policy.
Recent data have been mixed with some softening.
Discussed upside inflation risks had eased but not gone away.
Need to see more progress on underlying inflation.
Some inflation pressures remain.
Some data has been a bit softer, but inflation elevated.
Level of demand is still too high.
Change in wording of statement is deliberate.
Board has noted that data has been softer.
Have little bit more confidence on inflation.
Board feels the economy is pretty much in line with forecasts.
Do not need two or more quarterly inflation prints for change.
Will be watching all data including employment.
Did not discuss interest rate cut.
Did not discuss raising rates either.
Cannot say when will be confident on inflation.
But board has taken notice of softer data.
Do not want to endorse market reaction, but not surprised by reaction.
Do not know if we will cut rates in February.
Will have to watch data, wages and demand are slowing.
If inflation does not decline, then we have another problem.
Market reaction
AUD/USD is holding losses near 0.6400 on the above comments, down 0.54% on the day, as of writing.
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.
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
AUD/USD plummets toward 0.6200 ahead of US NFP data
AUD/USD has come under intense selling pressure, falling hard toward 0.6200 early Friday. US-China trade tensions, increased odds of Trump's tariffs-led global recession and dovish RBA expectations undermine the risk-sensitive Aussie. All eyes on US NFP and Powell.
USD/JPY falls back below 146.00 amid intense risk aversion
USD/JPY slips back under 146.00, fading its recovery in the Asian session on Friday. Risk aversion remains at full steam, reviving the haven demand for the Japanese Yen as investors ditch riskier assets amid a looming global trade war-led by US President Trump's aggressive tariff policies. US NFP and Powell eyed.
Gold: Will Powell and Payrolls drive the next leg higher?
Gold price is taking a breather early Friday after witnessing a volatile trading day on Thursday. Traders are consolidating the weekly gains, slightly away from the record high of $3,168, bracing for the US Nonfarm Payrolls report and US Federal Reserve Chair Jerome Powell’s speech for a fresh directional impetus.
Solana extends decline amid upcoming $200 million unlocks
Solana declined 3% in Friday's early Asian session, impacted by an upcoming $200 million staked SOL unlock from four whale wallets, according to Arkham Intelligence. Additionally, the SEC has acknowledged Fidelity's filing to launch a Solana exchange-traded fund.
Trump’s “Liberation Day” tariffs on the way
United States (US) President Donald Trump’s self-styled “Liberation Day” has finally arrived. After four straight failures to kick off Donald Trump’s “day one” tariffs that were supposed to be implemented when President Trump assumed office 72 days ago, Trump’s team is slated to finally unveil a sweeping, lopsided package of “reciprocal” tariffs.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.