Australian Dollar rises as RBA Bullock states inflation too high to consider rate cuts
- The Australian Dollar receives support from hawkish comments from RBA Governor Michele Bullock.
- The AUD may struggle as the United States may introduce further AI chip sanctions against China on Monday.
- The US Dollar may regain its ground as the Fed remains cautious about cutting rates following robust recent inflation data.
The Australian Dollar (AUD) extends its winning streak for the third successive session on Friday following the hawkish comments from Reserve Bank of Australia (RBA) Governor Michele Bullock. However, the AUD/USD pair may face downward pressure as the United States (US) is set to unveil additional measures on Monday aimed at curbing China’s ability to advance in artificial intelligence technology.
RBA Governor Bullock stated on Thursday that Australia’s core inflation remains “too high” to contemplate interest rate cuts in the near future. She emphasized that there is still progress to be made before inflation returns sustainably to the target level, according to Bloomberg.
The downside of the US Dollar (USD) may be limited, as the Federal Reserve (Fed) is expected to remain cautious about cutting interest rates following robust inflation data released on Wednesday. The report revealed strong consumer spending growth in October but also indicated little progress in reducing inflation, prompting the Fed to stay vigilant.
Australian Dollar receives support from hawkish RBA Governor Bullock
- Australia's Private Sector Credit increased by 0.6% month-over-month in October, exceeding market expectations of 0.5%, which had been the rate for the past three months. This represents the strongest monthly growth since June. On an annual basis, credit rose by 6.1%, up from the previous 5.8% increase.
- On Thursday, Australia's total new capital expenditure rose by 1.1% quarter-on-quarter in the third quarter, surpassing market expectations of a 0.9% increase and rebounding from a 2.2% decline in the previous quarter.
- The US Personal Consumption Expenditures (PCE) Price Index increased by 2.3% year-over-year in October, up from 2.1% in September. Meanwhile, the core PCE Price Index, which excludes volatile food and energy prices, rose by 2.8%, slightly higher than the 2.7% recorded the previous month. Both figures aligned with market expectations, indicating steady inflationary pressure within the economy.
- The latest Federal Open Market Committee's (FOMC) Meeting Minutes for the policy meeting held on November 7, indicated that policymakers are adopting a cautious stance on cutting interest rates, citing easing inflation and a robust labor market.
- Bloomberg reported that US President-elect Donald Trump is expected to appoint Jamieson Greer as the US Trade Representative on Tuesday. Greer’s nomination highlights the central role of tariffs in Trump’s economic strategy.
- The Australian Dollar faced challenges due to dampened market sentiment following President-elect Donald Trump's announcement of a 10% increase in tariffs on all Chinese goods entering the United States.
- Chicago Fed President Austan Goolsbee indicated on Tuesday that the Fed will likely continue lowering interest rates toward a neutral stance that neither stimulates nor restricts economic activity. Meanwhile, according to Bloomberg, Minneapolis Fed President Neel Kashkari highlighted that it remains appropriate to consider another rate cut at the Fed’s December meeting.
Technical Analysis: Australian Dollar hovers around 0.6500, nine-day EMA
The AUD/USD pair trades near 0.6500 on Friday, with bearish momentum strengthening based on technical analysis. The pair remains within a descending channel, and the 14-day Relative Strength Index (RSI) stays below 50, signaling persistent negative sentiment.
On the downside, the AUD/USD pair may revisit its four-month low of 0.6434, marked on November 26. A breach of this level could pave the way toward the yearly low of 0.6348, last reached on August 5. Additional support is found near the descending channel's lower boundary around 0.6300.
The immediate resistance lies at the nine-day Exponential Moving Average (EMA) at 0.6502, followed by the 14-day EMA at 0.6513. Further resistance is positioned near the channel's upper boundary at 0.6530. A clear breakout above these levels could set the stage for a move toward the four-week high of 0.6687.
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 US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.05% | -0.12% | -1.00% | -0.11% | -0.11% | -0.25% | -0.21% | |
| EUR | 0.05% | -0.07% | -0.97% | -0.05% | -0.05% | -0.20% | -0.16% | |
| GBP | 0.12% | 0.07% | -0.93% | 0.02% | 0.01% | -0.13% | -0.09% | |
| JPY | 1.00% | 0.97% | 0.93% | 0.92% | 0.90% | 0.75% | 0.80% | |
| CAD | 0.11% | 0.05% | -0.02% | -0.92% | -0.01% | -0.14% | -0.10% | |
| AUD | 0.11% | 0.05% | -0.01% | -0.90% | 0.01% | -0.14% | -0.09% | |
| NZD | 0.25% | 0.20% | 0.13% | -0.75% | 0.14% | 0.14% | 0.04% | |
| CHF | 0.21% | 0.16% | 0.09% | -0.80% | 0.10% | 0.09% | -0.04% |
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.
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