Australian Dollar remains subdued as US Dollar gains ground due to Trump tariff threats
- The Australian Dollar faces challenges as Trump’s tariff threats have created a headwind for the risk-sensitive currencies.
- The AUD declined as Chinese policymakers considered letting Yuan fall in response to an expected sharp hike in US tariffs.
- The US Dollar gained ground following a hotter-than-expected US PPI report released on Thursday.
The Australian Dollar (AUD) continues to struggle against the US Dollar (USD) on Friday. The tariff threats from Trump’s administration have boosted the US Dollar (USD) across the board and created a headwind for the AUD/USD pair. Additionally, speculations about a potential 10% tariff on Chinese goods might drag the AUD lower as China has been the largest trading partner of Australia.
The AUD received support after the release of domestic mixed employment data on Thursday. The seasonally adjusted Employment Change rose by 35,600, bringing the total number of employed people to 14,535,500 in November. Meanwhile, the Unemployment Rate dropped to 3.9%, the lowest since March, lower than market estimates of 4.2%.
The US Dollar appreciated due to the hotter-than-expected US Producer Price Index (PPI) report released on Thursday. The US PPI jumped 0.4% MoM in November, the largest gain since June, after an upwardly revised 0.3% increase in October. This reading was better than the 0.2% expected.
The US Federal Reserve (Fed) interest rate decision will take center stage next week. Traders are now fully pricing in a 25 basis point rate cut on December 18, according to the CME FedWatch Tool.
Australian Dollar faces challenges due to tariff threats from Trump’s administration
- Beijing has already begun retaliation against Trump trade sanctions, launching a probe into Nvidia, threatening to blacklist a US apparel company, blocking the export of critical minerals to the United States, and tightening the supply chain for drones.
- US Consumer Price Index (CPI) rose to 2.7% year-over-year in November from 2.6% in October. The headline CPI reported a 0.3% reading MoM, in line with the market consensus. Meanwhile, the core CPI, excluding volatile food and energy prices, climbed 3.3% YoY, while the core CPI increased 0.3% MoM in November, as expected.
- The Australian Dollar received downward pressure on Wednesday as China, a key trading partner of Australia, saw its top leaders and policymakers consider letting the Chinese Yuan fall in response to an expected sharp hike in US tariffs, per Reuters.
- China President Xi Jinping stated on Tuesday, "China has full confidence in achieving this year's economic target." Xi emphasized that China will continue to serve as the largest engine of global economic growth and asserted that there would be no winners in tariff wars, trade wars, or tech wars.
- China's Trade Balance (CNY) increased to CNY 692.8 billion in November, up from CNY 679.1 billion in the previous month. Exports grew by 1.5% year-over-year in November, compared to the 11.2% rise in October. Meanwhile, imports increased by 1.2% YoY, recovering from the 3.7% decline recorded earlier.
- The RBA kept the Official Cash Rate (OCR) unchanged at 4.35% in its final policy meeting in December. RBA Governor Michele Bullock highlighted that while upside inflation risks have eased, they persist and require ongoing vigilance. The RBA will closely monitor all economic data, including employment figures, to guide future policy decisions.
- Australia's economy grew at its slowest annual pace since the pandemic in the third quarter. The OZ nation’s Gross Domestic Product (GDP) rose 0.3% in the September quarter, missing market forecasts of 0.4%. Weaker-than-expected GDP growth made markets almost fully price in a rate cut next April at 96% (from 73% before), according to Refinitive interest rate probabilities data.
Technical Analysis: Australian Dollar maintains its position above 0.6350, yearly lows
The AUD/USD pair hovers near 0.6360 on Friday. The daily chart analysis suggests a strengthening bearish bias as the pair moves downwards within a descending channel pattern. The 14-day Relative Strength Index (RSI) also remains slightly above the 30 level, indicating sustained bearish momentum.
The yearly low of 0.6348, last seen on August 5, serves as immediate support. A successful break below this level could strengthen the bearish bias and lead the AUD/USD pair toward the descending channel’s lower boundary around the 0.6190 level.
On the upside, the AUD/USD pair may find initial resistance around the nine-day Exponential Moving Average (EMA) at 0.6404. The next barrier appears at the 14-day EMA at 0.6427, which is aligned with the upper boundary of the descending channel. A decisive breakout above this channel could drive the pair toward the seven-week high of 0.6687.
AUD/USD: Daily Chart
Australian Dollar PRICE Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.03% | 0.03% | 0.05% | 0.07% | 0.06% | 0.03% | 0.03% | |
| EUR | -0.03% | 0.00% | 0.03% | 0.05% | 0.04% | 0.00% | 0.00% | |
| GBP | -0.03% | -0.01% | 0.04% | 0.05% | 0.03% | -0.00% | 0.00% | |
| JPY | -0.05% | -0.03% | -0.04% | 0.03% | 0.01% | -0.03% | -0.02% | |
| CAD | -0.07% | -0.05% | -0.05% | -0.03% | -0.02% | -0.05% | -0.04% | |
| AUD | -0.06% | -0.04% | -0.03% | -0.01% | 0.02% | -0.03% | -0.03% | |
| NZD | -0.03% | -0.00% | 0.00% | 0.03% | 0.05% | 0.03% | 0.00% | |
| CHF | -0.03% | -0.01% | -0.00% | 0.02% | 0.04% | 0.03% | -0.00% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (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 interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.