- The AUD/USD continues to face down pressure amid the stagnant trade negotiations between the US and China.
- It is unlikely that Beijing will reduce tariffs before the next conversations in Switzerland, which feeds the uncertainty of the market and weakens the feeling of risk.
- President Trump has announced an “important” commercial agreement with the United Kingdom, although key tariffs will remain at 10%.
The Aud/USD pair continues its loss streak per third consecutive session, negotiating about 0.6390 during the Asian session on Friday. The Australian dollar (AUD) remains under pressure due to stagnation in the progress of commercial negotiations between the US and China. Given the close economic relationship between Australia and China, any pressure on the Chinese economy tends to affect the Aud.
According to the Global Times – claying the Chinese embassy in the United States – it is unlikely that Beijing will reduce tariffs before the next conversations in Switzerland. This adds uncertainty to the market and decreases the feeling of risk.
In the United States (USA), President Donald Trump has adopted a firm position on commercial policy with China, after the appointment of a new envoy in Beijing. While there are discussions about tariff exemptions, the administration seems cautious, with Trump stating that “they are not looking for so many exemptions.”
Meanwhile, China is considering a significant change in its real estate market – providing housing presale and allowing only the sale of completed properties. This movement, intended to stabilize the real estate sector, is part of a broader reform plan that is still under development. The regulation would apply to future land sales, excluding public housing, and local governments would have flexibility in their implementation.
The US dollar index (DXY), which measures the value of the US dollar (USD) compared to a foreign exchange basket, is being negotiated around 100.60, driven by solid economic data from the US and expectations of prolonged performance differentials. However, the initial optimism around a commercial agreement between the US and the United Kingdom has vanished, since it became clear that existing 10% tariffs will remain.
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.
