- The Aud/USD pair goes from the maximum of five months of 0.6493 reached on Monday.
- The US dollar is gaining strength since it is widely expected that the Fed maintains interest rates without changes on Wednesday.
- NAB has raised its end -of -year forecast for torque to 0.70, citing a sustained bearish trend in the US dollar.
The AUD/USD is going back from a maximum of five months of 0.6493 reached on Monday, sliding to around 0.6450 during the Asian session on Tuesday. The fall occurs as the US dollar (USD) is strengthened before the next monetary policy of the Federal Reserve (FED) on Wednesday.
Although it is widely expected that the Fed maintains the stable rates, the attention of investors remains focused on the comments of President Jerome Powell, especially amid uncertainties related to tariffs and the growing pressure of President Donald Trump to cut rates.
Adding to the mixture, Treasury Secretary Scott Besent said Monday that the US is “very close to some agreements”, repeating Trump’s comments from the previous weekend that suggest that trade agreements could be completed soon. Trump confirmed that the negotiations are ongoing, but ruled out conversations with Chinese President Xi Jinping this week. Meanwhile, the China Ministry of Commerce declared last Friday that it is reviewing an US proposal to restart commercial discussions.
In the data front, the US ISM services PMI rose to 51.6 in April, exceeding 50.6 expectations and improving from 50.8 in March. The new requests rose to 52.3 (from 50.4), while the employment index in services improved to 49 (from 46.2).
The Australian dollar (AUD) found support after Australian Prime Minister Anthony Albanese assured a second three -year term in the 2025 federal elections, marking significant profits in the results of Saturday. Albanese promised a “disciplined” government focused on relief of the cost of living, renewable energy, tax cuts, housing and medical care.
The Westpac CEO said that “the worst has already happened” in regards to the stress of consumers and companies, with a demand for financing of more strong than expected. The Bank predicts a 25 basic points rate cut by the Bank of the Australian Reserve (RBA) at its May 19-20 meeting.
Meanwhile, the National Australia Bank (NAB) has raised its end -of -year forecast for the AUD/USD to 0.70, citing a prolonged USD bearish market. NAB hopes that the torque will remain around 0.65 until the middle of the year, gradually increasing around 0.67 for December. The bank attributes the perspective to changes in interest rates differentials and anticipates that the RBA will cut the rates at 50 basic points in May.
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.
