- Analytics
- News and Tools
- Market News
- Australian Dollar sees mild losses after labor market data from the US and Australia
Australian Dollar sees mild losses after labor market data from the US and Australia
- AUD/USD slightly declined on Thursday, just below 0.6730.
- Newly released employment data sets the direction for possible RBA and Federal Reserve decisions.
- However, monetary divergences between both banks remain steady.
The Australian Dollar (AUD) suffered minor losses against the USD during Thursday's session, falling marginally to 0.6730. The AUD slightly faltered due to investor responses to both Australian and US labor market data that has provided further clues for the next Reserve Bank of Australia (RBA) and Federal Reserve decisions.
Despite the underperforming Australian economy, stubbornly high inflation pressures the RBA to defer rate cuts potentially limiting the AUD's downside. The RBA is anticipated to be among the final central banks within the G10 countries to introduce rate cuts, a factor that promises to sustain the AUD's momentum.
Daily digest market movers: Australian labor market data guides the AUD course.
- The Australian Bureau of Statistics (ABS) revealed an impressive 50.2K increase in employment changes, surmounting the earlier market forecasts of 20K and May's 39.5K record.
- On the negative side, the Unemployment Rate escalated slightly from 4.0% to 4.1%, and although minor, it might ease the RBA’s hawkish stance.
- On the US front, labor data indicates applicants for unemployment insurance benefits rose by 243K in the week ending on July 13.
- These figures exceeded initial forecasts and previous weekly records according to Thursday's report from the US Department of Labor.
- Currently, projections predict nearly a 50% chance of the RBA taking a rate hike, possibly in September or November.
- The potential rate cut by the Federal Reserve in September, however, seems a close deal and divergent approaches by the Fed and RBA towards their respective monetary policies could curb the losses of the pair.
Technical Analysis: AUD/USD continues flat, overall outlook stays positive.
Despite the losses in the week, the future of AUD/USD remains generally positive as the pair maintains levels not experienced since the beginning of the year. After the early July gains, indicators such as the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) have shown weakening trends, implying the pair has entered a correction period. For the next sessions, the pair might side-ways trade in the 0.6700-0.6800 channel as buyers book profits.
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.
© 2000-2024. All rights reserved.
This site is managed by Teletrade D.J. LLC 2351 LLC 2022 (Euro House, Richmond Hill Road, Kingstown, VC0100, St. Vincent and the Grenadines).
The information on this website is for informational purposes only and does not constitute any investment advice.
The company does not serve or provide services to customers who are residents of the US, Canada, Iran, The Democratic People's Republic of Korea, Yemen and FATF blacklisted countries.
Making transactions on financial markets with marginal financial instruments opens up wide possibilities and allows investors who are willing to take risks to earn high profits, carrying a potentially high risk of losses at the same time. Therefore you should responsibly approach the issue of choosing the appropriate investment strategy, taking the available resources into account, before starting trading.
Use of the information: full or partial use of materials from this website must always be referenced to TeleTrade as the source of information. Use of the materials on the Internet must be accompanied by a hyperlink to teletrade.org. Automatic import of materials and information from this website is prohibited.
Please contact our PR department if you have any questions or need assistance at pr@teletrade.global.
Bank transfers
