The Australian Dollar (AUD) fell against the US Dollar (USD) on Friday, giving up its daily gains. AUD/USD fell with gains ahead of the University of Michigan Consumer Confidence Index for December later in the day.
The Australian dollar could receive support from investor caution after the release of Australian consumer inflation expectations, which rose to 4.7% in December from November’s three-month low of 4.5%, supporting the Reserve Bank of Australia’s hawkish stance.
Private sector credit in Australia rose 0.6% month-on-month in November, beating expectations of 0.2% but slowing from October’s 0.7% increase. On an annual basis, credit growth rose to 7.4% year-on-year from 7.3%, marking the fastest pace since January 2023.
The US dollar rises despite Fed rate cut bets
- The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is gaining ground and trading around the 98.50 level at the time of writing. However, the US dollar struggled amid rising expectations of interest rate cuts by the US Federal Reserve following US CPI inflation slowing unexpectedly in November.
- The US Bureau of Labor Statistics (BLS) released on Thursday that the US Consumer Price Index (CPI) fell to 2.7% in November. This reading was lower than market expectations of 3.1%. Meanwhile, the US core CPI, which excludes volatile food and energy prices, rose 2.6%, missing expectations of 3.0%. This number represents the slowest pace since 2021.
- US President Donald Trump said on Thursday that the next head of the Federal Reserve will be someone who believes in cutting interest rates “significantly.” Trump also indicated that he will soon announce a successor to current Fed Chairman Jerome Powell.
- Federal Reserve (Fed) Governor Christopher Waller, who is being considered for the position of head of the central bank, reiterated his dovish stance on interest rates during a CNBC forum. “Since inflation is still high, we can take our time – there is no rush to get down,” Waller said. “We can steadily lower the interest rate towards neutral.”
- The CME FedWatch tool shows a 72.3% probability of holding interest rates at the Fed’s January meeting, down from 75.6% the day before. Meanwhile, the probability of a 25 basis point rate cut rose to 27.7% from 24.4%.
- The November US jobs report showed 64K payroll growth, slightly above expectations, but October numbers were revised down sharply, and the unemployment rate rose to 4.6%, the highest level since 2021, underscoring a gradual slowdown in the labor market. Retail sales stabilized during the month, adding to signs that consumer demand is losing momentum.
- Fed officials are divided on whether further easing in monetary policy is needed next year. The average Fed official expected just one cut in 2026, but some policymakers do not expect more cuts. Meanwhile, traders expect two interest rate cuts next year.
- Traders expect the Reserve Bank of Australia to raise interest rates as early as February. The Commonwealth Bank of Australia and the National Bank of Australia now expect the RBA to begin tightening monetary policy sooner than previously expected, signaling stubborn inflation in a capacity-constrained economy. Their forecasts follow the central bank’s hawkish comment on interest rates at its final meeting of 2025 last week. There is a 28% chance of a rate hike in February, and nearly 41% in March, with August priced in almost entirely.
- The S&P Global preliminary manufacturing PMI in Australia rose to 52.2 in December from 51.6 previously, according to data released by S&P Global on Tuesday. Meanwhile, the services PMI fell to 51.0 from 52.8, and the composite PMI fell to 51.1 from 52.6.
- The Australian Bureau of Statistics (ABS) reported last week that the unemployment rate held steady at 4.3% in November. This figure was lower than market expectations of 4.4%. Furthermore, Australian Employment Change came to -21.3K in November from 41.1K in October (revised from 42.2K), compared to consensus expectations of 20K.
The Australian dollar remains within the confluence support area around 0.6600
The AUD/USD pair is trading below 0.6620 on Friday. Technical analysis on the daily chart shows that the pair is positioned below the ascending channel trend, which reflects a weak bullish bias. The nine-day Exponential Moving Average (EMA) is trending higher, sitting just above the spot price and limiting expansion attempts. The short-term average has been rising continuously over the past two weeks, indicating an improvement in the bullish bias.
The 14-day Relative Strength Index (RSI) at 56.76 (neutral-bullish) confirms momentum building. The pair maintains a modest uptrend as the slope of the nine-day EMA remains positive while the price consolidates just below the average. The Relative Strength Index has slowed from overbought readings seen earlier this month, but remains above its midline, keeping the bulls in check.
AUD/USD is testing the nine-day EMA at 0.6621. A bounce towards the up channel would revive the bullish bias and support the pair to test a three-month high of 0.6685, followed by 0.6707, the highest level since October 2024. On the downside, AUD/USD could decline towards the psychological level of 0.6500, followed by a six-month low of 0.6414 recorded on August 21.
Australian dollar price today
The table below shows the percentage change in the Australian Dollar (AUD) against the major currencies listed today. The Australian dollar was the weakest against the British pound.
| US dollars | euro | GBP | JPY | Canadian | Australian dollar | New Zealand dollar | Swiss franc | |
|---|---|---|---|---|---|---|---|---|
| US dollars | 0.01% | 0.00% | 0.23% | 0.06% | 0.06% | 0.19% | 0.10% | |
| euro | -0.01% | -0.01% | 0.24% | 0.05% | 0.06% | 0.18% | 0.08% | |
| GBP | -0.01% | 0.00% | 0.25% | 0.06% | 0.07% | 0.19% | 0.09% | |
| JPY | -0.23% | -0.24% | -0.25% | -0.16% | -0.18% | -0.06% | -0.15% | |
| Canadian | -0.06% | -0.05% | -0.06% | 0.16% | -0.01% | 0.11% | 0.03% | |
| Australian dollar | -0.06% | -0.06% | -0.07% | 0.18% | 0.01% | 0.13% | 0.04% | |
| New Zealand dollar | -0.19% | -0.18% | -0.19% | 0.06% | -0.11% | -0.13% | -0.09% | |
| Swiss franc | -0.10% | -0.08% | -0.09% | 0.15% | -0.03% | -0.04% | 0.09% |
The heat map shows the percentage changes in major currencies versus each other. The base currency is chosen from the left column, while the counter currency is chosen from the top row. For example, if you select 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).
Frequently asked questions about the Australian dollar
One of the most important 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 major driver is the price of its largest export, iron ore. The health of the Chinese economy, its largest trading partner, is one factor, in addition to Australia’s inflation, its growth rate and its trade balance. Market sentiment – whether investors are snapping up riskier assets (risk on) or looking for safe havens (risk off) – is also a factor, with risk appetite positive for the Australian dollar.
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 affects the level of interest rates in the economy as a whole. The RBA’s main objective 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 Australian dollar, and relatively low interest rates. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former being AUD negative and the latter AUD positive.
China is Australia’s largest trading partner, so the health of the Chinese economy has a major impact on the value of the Australian Dollar (AUD). When the Chinese economy is performing well, it buys more raw materials, goods and services from Australia, which raises demand for the Australian dollar, raising its value. The opposite is the case when the Chinese economy does not grow as quickly as expected. Therefore, positive or negative surprises in Chinese growth data often have a direct impact on the Australian dollar and its crosses.
Iron ore is Australia’s largest export, representing $118 billion annually according to 2021 data, and China is its main destination. Therefore, the price of iron ore could be a driver of the Australian dollar. In general, if the price of iron ore rises, the Australian dollar also rises, as overall demand for the currency increases. The opposite is the case if the price of iron ore falls. Higher iron ore prices also tend to increase the likelihood of a positive trade balance for Australia, which is also positive for the Australian dollar.
The balance of trade, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can affect the value of the Australian dollar. If Australia produces highly sought-after exports, its currency will gain value from the excess demand generated by foreign buyers seeking to buy its exports in exchange for what it spends to buy imports. Therefore, a positive net trade balance strengthens the Australian dollar, with the opposite effect if the trade balance is negative.
