• The Australian Dollar strengthens amid risk-on sentiment following the postponement of Trump’s reciprocal tariffs.
  • The AUD could encounter pressure as the RBA is widely expected to announce a rate cut on Tuesday.
  • Weaker US Retail Sales data has intensified speculation that the Fed may lower interest rates only later in the year.

The Australian Dollar (AUD) continues its upward momentum against the US Dollar (USD) for the third straight day on Monday, supported by US President Donald Trump's decision to delay the implementation of reciprocal tariffs.

The AUD/USD pair also appreciates as the US Dollar (USD) weakens as disappointing US retail sales report has reignited speculation that the Federal Reserve (Fed) may cut interest rates later this year, despite ongoing inflation concerns.

The upside of the AUD/USD pair could be restrained amid rising speculation of the Reserve Bank of Australia (RBA) rate cut on Tuesday. The RBA is expected to cut its Official Cash Rate (OCR) by 25 basis points (bps) to 4.10%, the first-rate reduction in four years.

Australian Dollar advances as US Dollar loses ground on weaker Treasury yields

  • The US Dollar Index (DXY), which tracks the US Dollar's performance against six major currencies, remains under pressure for the third consecutive session due to weaker US Treasury yields. As of writing, the DXY hovers around 106.70, while yields on 2-year and 10-year US Treasury bonds stand at 4.26% and 4.47%, respectively.
  • Data from the US Census Bureau on Friday showed that US Retail Sales fell by 0.9% in January, following a revised 0.7% increase in December (previously reported as 0.4%). This decline was sharper than the market’s expectation of a 0.1% drop.
  • Core PPI inflation in the United States (US) rose to 3.6% YoY in January, exceeding the expected 3.3% but slightly below the revised 3.7% (previously reported as 3.5%). This has reinforced expectations that the Federal Reserve (Fed) will delay rate cuts until the second half of the year.
  • US Consumer Price Index (CPI) rose 3.0% year-over-year in January, exceeding expectations of 2.9%. The core CPI, which excludes food and energy, increased to 3.3% from 3.2%, surpassing the forecast of 3.1%. On a monthly basis, headline inflation jumped to 0.5% in January from 0.4% in December, while core CPI rose to 0.4% from 0.2% over the same period.
  • In his semi-annual report to Congress, Fed’s Powell said the Fed officials “do not need to be in a hurry" to cut interest rates due to strength in the job market and solid economic growth. He added that US President Donald Trump's tariff policies could put more upward pressure on prices, making it harder for the central bank to lower rates.
  • A Reuters poll of economists now suggests the Federal Reserve will delay cutting interest rates until next quarter amid rising inflation concerns. Many who had previously expected a March rate cut have revised their forecasts. The majority of economists surveyed between February 4-10 anticipate at least one rate cut by June, though opinions on the exact timing remain divided.
  • Federal Reserve Bank of Cleveland President Beth Hammack stated on Tuesday that keeping interest rates steady for an extended period will likely be appropriate. Hammack emphasized that a patient approach will allow the Fed to assess economic conditions and noted that the central bank is well-positioned to respond to any shifts in the economy, according to Reuters.
  • The dovish sentiment regarding the RBA rate cut remains intact following fresh inflation outlook data. Consumer inflation expectations climbed to 4.6% in February from 4.0% in January, reaching their highest level since April 2024.

Australian Dollar rises toward upper ascending channel boundary near 0.6400

The AUD/USD pair hovers near 0.6360 on Monday, moving upwards within the ascending channel pattern. This suggests that market bias is bullish. Additionally, the 14-day Relative Strength Index (RSI) maintains its position above the 50 mark, reinforcing a bullish bias.

On the upside, the AUD/USD pair may test the upper boundary of the ascending channel at 0.6380 level, followed by the psychological level of 0.6400.

The AUD/USD pair could find its primary support at the nine-day EMA of 0.6310 level, followed by the 14-day EMA of 0.6294. A break below these levels could weaken the short-term price momentum, potentially pushing the pair toward the ascending channel’s lower boundary at the 0.6270 level.

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 strongest against the Swiss Franc.

  USD EUR GBP JPY CAD AUD NZD CHF
USD   -0.01% -0.06% -0.44% -0.10% -0.32% -0.38% 0.02%
EUR 0.00%   0.10% -0.46% 0.00% -0.23% -0.27% 0.15%
GBP 0.06% -0.10%   -0.46% -0.09% -0.28% -0.37% 0.03%
JPY 0.44% 0.46% 0.46%   0.33% 0.14% 0.27% 0.43%
CAD 0.10% -0.01% 0.09% -0.33%   -0.20% -0.28% 0.12%
AUD 0.32% 0.23% 0.28% -0.14% 0.20%   -0.04% 0.36%
NZD 0.38% 0.27% 0.37% -0.27% 0.28% 0.04%   0.40%
CHF -0.02% -0.15% -0.03% -0.43% -0.12% -0.36% -0.40%  

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.

 

Source: Fxstreet