- The Aud/USD can lose ground in the middle of the caution Federal Reserve Policy Perspective.
- The Fed maintained interest rates without changes in 4.25%–4.50%, while highlighting the growing risks related to inflation and unemployment.
- The Australian dollar can receive support from optimism about a possible advance in commercial relations between the US and China.
The Aud/USD pair advances in the Asian session on Thursday, negotiating around 0.6440 after falling more than 1% in the previous session. The pair had previously touched a maximum of five months of 0.6514 on Wednesday, but retreated in the cautious policy perspective of the Federal Reserve (Fed). As expected, the Fed maintained stable interest rates at 4.25%–4.50%, but its statement recognized the growing risks related to inflation and unemployment, injecting new uncertainty in the markets.
The feeling of the market suffered a new blow after the press conference of the president of the FED, Jerome Powell, where he pointed out that the US commercial tariffs could hinder the objectives of the Fed for inflation and employment in 2025. Powell indicated that the persistent policy instability could force the Fed to adopt a more patient position of ‘waiting and seeing’ on future features of fees. While tariffs under the administration of Trump had previously decreased the confidence of consumers and companies, the absence of significantly weak economic data makes Fed difficult to justify short -term policy changes.
The FED statement reinforced a data -dependent approach, citing inflation as “something high” and pointing out risks increased both in the front of inflation and employment. This cautious perspective, together with the continuation of the reduction of the Fed balance, has strengthened the US dollar (USD), pressing the aud/usd torque.
An additional pressure on the Aud/USD torque came from the fortress of the US dollar (USD) in the middle of news that US Treasury Secretary, Scott Besent, and the Commerce Representative, Jamieson Greer, will meet with the Vice Prime Chinese Minister, He LIFEG, in Geneva this weekend – the first high -level conversations between the US The trade dispute driven by tariffs.
Despite the setback, the Australian dollar (AUD) remains supported by optimism about a possible advance in commercial relations between the US and China, given the significant commercial ties of Australia with China. In addition, the Popular Bank of China announced plans to reduce key interest rates and reduce banks reserve requirements to stimulate economic growth.
The AI group industry index improved in April, marking the 33rd consecutive month of contraction. Manufacturing, particularly in export -dependent sectors. These developments have strengthened market expectations that the Bank of the Australian Reserve (RBA) could cut its cash rate at 25 basic points to 3.85% later this month.
Faqs Australian dollar
One of the most important factors for the Australian dollar (Aud) is the level of interest rates set by the Australian Reserve Bank (RBA). Since Australia is a country rich in resources, another key factor is the price of its greatest export, iron mineral. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and commercial balance. The feeling of the market, that is, if investors are committed to more risky assets (Risk-on) or seek safe shelters (Risk-Off), it is also a factor, being the positive risk-on for the AUD.
The Australian Reserve Bank (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 the interest rates of the economy as a whole. The main objective of the RBA is to maintain a stable inflation rate of 2% -3% by adjusting the interest rates or the low. Relatively high interest rates compared to other large central banks support the AU, and the opposite for the relatively low. The RBA can also use relaxation and quantitative hardening to influence credit conditions, being the first refusal for the AU and the second positive for the AUD.
China is Australia’s largest commercial partner, so the health of the Chinese economy greatly influences the value of the Australian dollar (Aud). When the Chinese economy goes well, it buys more raw materials, goods and services in Australia, which increases the demand of the AU and makes its value upload. The opposite occurs when the Chinese economy does not grow as fast as expected. Therefore, positive or negative surprises in Chinese growth data usually have a direct impact on the Australian dollar.
Iron mineral is the largest export in Australia, with 118,000 million dollars a year according to data from 2021, China being its main destination. The price of iron ore, therefore, can be a driver of the Australian dollar. Usually, if the price of iron ore rises, the Aud also does, since the aggregate demand of the currency increases. The opposite occurs when the price of low iron ore. The highest prices of the iron mineral also tend to lead to a greater probability of a positive commercial balance for Australia, which is also positive for the AUD.
The commercial balance, which is the difference between what a country earns with its exports and what it pays for its imports, is another factor that can influence the value of the Australian dollar. If Australia produces highly requested exports, its currency will gain value exclusively for the excess demand created by foreign buyers who wish to acquire their exports to what you spend on buying imports. Therefore, a positive net trade balance strengthens the AUD, with the opposite effect if the commercial balance is negative.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
