- The AUD/USD weakens around 0.6440 in the early hours of Monday’s Asian session.
- The US attacks Iran nuclear sites, risking a broader war in the Middle East.
- Australia’s Global S&P manufacturing PMI reached 51.0 in June, the PMI of services improved 51.3.
The Aud/USD torque attracts some sellers about 0.6440 during the first hours of Monday’s Asian session. The US dollar (USD) advances slightly amid the growing tensions in the Middle East after the United States (USA) carried out air attacks in three nuclear sites in Iran during the weekend.
The president of the USA, Donald Trump, said on Saturday that the US had attacked three key nuclear facilities in the Iranian regime, Fordo, Natanz and Isfahan. The US marine submarines also launched more than 30 Tomahawk missiles towards Iran, according to two defense officials. Investors hoped that US participation would cause a massive sale in the stock market and a possible demand for the dollar and other shelter assets, but uncertainty persisted.
The governor of the Federal Reserve (Fed), Christopher Waller, said Friday that the Central Bank of the US could begin to cut interest rates as soon as next month, pointing to flexibility in the midst of global economic uncertainty and the increase in geopolitical risks. These comments dovish could weigh on the dollar and help limit losses of the short -term torque.
In the Australian front, the data published by S&P Global on Monday showed that the preliminary reading of the Purchasing Management Index (PMI) S&P manufacturing Global of Australia was 51.0 in June compared to 51.0 previous. Meanwhile, the PMI of Services improved to 51.3 in June from the previous reading of 50.6, while the compound PMI rose to 51.2 in June compared to 50.5 previous.
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.
