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: 2025.02.18
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Australian Dollar refreshes two-month high near 0.6370 ahead of RBA monetary policy decision
World FX news
Breaking news
Australian Dollar refreshes two-month high near 0.6370 ahead of RBA monetary policy decision
New
2025.02.18 05:57
2025.02.18 05:57
2025.02.18 05:57
- Aussie climbs on upbeat risk appetite and a softer US Dollar.
- Traders downplay the potential impact of new tariffs.
- RBA expected to cut the cash rate from 4.35% to 4.10%.
The AUD/USD pair posts a fresh two-month high at 0.6373 in Monday's session. The Aussie pair strengthens as the Australian Dollar (AUD) performs strongly in an upbeat market mood. Market sentiment is favorable for risky assets as investors expect United States (US) President Donald Trump's tariff agenda will not prove as impactful as initially feared, as well as a softer US Dollar (USD).
Daily digest market movers: Aussie set to test RBA decision
- Global trade disputes have recently boosted risk-sensitive currencies, with the Australian Dollar tracking higher as the United States Dollar retreated.
- The Aussie capitalized on the Greenback's pullback, clawing back from midweek losses and briefly reclaiming the 0.6399 region at the top of its monthly range.
- With inflation pressures in Australia trending lower, market participants anticipate a Reserve Bank of Australia (RBA) rate cut from 4.35% to 4.10% on Tuesday.
- Nonetheless, the RBA could deliver a hawkish surprise by highlighting labor-market tightness and residual inflation risks.
- In that sense, markets will closely monitor the tone of the statement as the RBA could continue being the last of the G10 central banks to cut rates.
AUD/USD technical outlook: Momentum builds above 0.6365 as pair eyes 100-day SMA
The AUD/USD pair rose to 0.6365 on Monday, notching levels unseen since December and firmly crossing its 20-day Simple Moving Average. The Relative Strength Index (RSI) is at 67, pushing into near-overbought territory with strong upside momentum, while the Moving Average Convergence Divergence (MACD) histogram prints rising green bars.
Should risk appetite remain robust and markets absorb any RBA rate decision smoothly, the Aussie could extend gains toward the 100-day Simple Moving Average near 0.6670.
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.
Last updated
: 2025.02.18
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