- The aud/USD weakens about 0.6465 in the early Asian session on Monday.
- The US NFP increased by 73,000 in July, weaker than expected.
- The operators will closely follow trade negotiations between the US and China.
The aud/USD torque is negative in a negative note around 0.6465 during the early Asian session on Monday, pressured by a modest rebound in the US dollar (USD). The decrease for the torque could be limited due to the US employment data weakest than expected, which generated expectations of feature cuts by the Federal Reserve (Fed) this year.
The data published by the US Labor Statistics Office (BLS) on Friday show that non -agricultural payroll (NFP) in the United States (USA) increased by 73,000 in July, compared to an increase of 14,000 (revised 147,000) observed in June. This figure was weaker than the market expectation of 110,000. In addition, the unemployment rate rose to 4.2% in July from 4.1% in June, as expected.
Fed fund operators increased bets on rates cuts again on Friday after disappointing employment data, which could drag the dollar down. The operators are now valuing 63 basic points (PBS) of cuts for the end of the year, compared to around 34 PBS on Thursday, with the first cut expected for September.
The US and China failed to agree on the extension of a 90 -day pause in tariffs during the last round of conversations held in Stockholm, Sweden. Any pause renewal is scheduled to expire on August 12, and will ultimately depend on the president of the US, Donald Trump. Meanwhile, US tariffs have been reduced from 145% to 30%, and Chinese tariffs from 125% to 10%. The operators will closely follow development around the commercial agreement between the US and China. Any sign of renewed tumult could exert some sale pressure on the Australian dollar, since China is an important commercial partner of Australia.
Australian dollar – frequent questions
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.
