- The AUD/USD extends the fall to 0.6485 in the first Asian session on Monday.
- The increased geopolitical tensions in the Middle East support the US dollar and create a wind against the pair.
- Retail sales and industrial production in China will be at the Center for Care on Monday.
The aud/USD torque weakens 0.6485 during the first Asian session on Monday. The growing geopolitical tensions in the Middle East after an Israeli attack to Iran provide some support to the US dollar (USD). Later on Monday, investors prepare for the publication of retail sales and industrial production of Mayo in search of a new impulse.
Israel began attacks against Iran on Friday, aiming at nuclear facilities and missile factories and killing military leaders. At the last minute of Sunday, Iran launched a new attack against Israel, with an explosion seen in the coastal city of Haifa. The Iranian Semi-Official News Agency Mehr reported Sunday that the fourth phase of Iran’s operation against Israel has begun. Iranian officials stressed that they would respond “firmly to any adventurism” of Israel.
In the midst of the growing geopolitical tensions, investors ignored US economic data published on Friday. The Michigan consumer’s feeling index jumped at 60.5 in June from 52.2 in the previous reading, the first improvement in six months. This reading was better than expected.
Investors will keep an eye on retail sales and industrial production from China for May, which will be published later on Monday. If the reports show a better result than expected, this could raise the Australian dollar, since China is an important commercial partner of Australia.
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.
