- The AUD/USD is strengthened around 0.6535 in the early Asian session on Monday.
- The uncertainty about Trump’s tariffs and moderate expectations of the Fed weigh on the US dollar.
- China’s NBS PMI data will be the culminating point later on Monday.
The aud/USD wins traction about 0.6535 during the early Asian session on Monday. The renewed commercial concerns due to the White House seem to be destined not to meet the wide global commercial reforms that it promised to achieve, which weighs on the dollar. Investors are prepared for the publication of the data of the Purchasing Managers Index (PMI) of the NBS of China, which will be published later on Monday.
The main advisors of the US President Donald Trump said Friday that the agreements are expected to even a dozen the largest business partners of the US are completed before the deadline of July 9, according to Bloomberg. However, uncertainty persists, since it was not yet clear if the administration would remain firm on the deadline or extend it to allow more time for negotiations. This, in turn, drags the US dollar (USD) down and acts as a tail wind for the torque.
The markets expect that the US Federal Reserve (FED) is held waiting at its meeting at the end of July. However, operators increase bets that the US Central Bank will cut the rates more times this year and possibly before expected, since some US economic data point to a weakened economy, which contributes to the fall of the USD.
The National Statistics Office of China (NBS) will publish its monthly PMI reports later on Monday. The manufacturing PMI is expected to improve 49.7 in June from 49.5 in May, while it is projected that the non -manufacturing PMI will remain unchanged in 50.3 in the same period of the report. Any missing surprise in Chinese economic data could undermine the AUD, which acts as Proxy of China, since China is an important commercial partner for 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.
