Forex News
During European trading hours, ECB officials: François Villeroy de Galhau and Madis Muller delivers remarks on inflation and geopolitical uncertainty.
ECB policymaker and governor of Bank of France François Villeroy de Galhau
ECB will remain vigilant.
We are in the face of uncertainty.
WE have the ability to act as necessary.
ECB Governing Council member Madis Muller
The current situation isn't unprecedented.
Inflation will probably be a bit higher.
Market reaction
The Euro (EUR) has reacted positively to comments from a string of ECB officials after the blackout period. As of writing, EUR/USD is down 0.14% to near 1.1572 but has recovered from its intraday low of 1.1552.
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
Here is what you need to know on Friday, March 20:
The trading action in financial markets turns relatively subdued on Friday as investors assess the policy decisions by major central banks. The US economic calendar will not feature any high-tier macroeconomic data releases on Friday and market participants will stay focused on developments surrounding the Middle East conflict.
US Dollar Price This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -1.26% | -1.37% | -0.76% | -0.02% | -1.42% | -1.66% | -0.13% | |
| EUR | 1.26% | -0.09% | 0.42% | 1.25% | -0.15% | -0.39% | 1.14% | |
| GBP | 1.37% | 0.09% | 0.66% | 1.34% | -0.05% | -0.30% | 1.30% | |
| JPY | 0.76% | -0.42% | -0.66% | 0.77% | -0.65% | -0.88% | 0.66% | |
| CAD | 0.02% | -1.25% | -1.34% | -0.77% | -1.43% | -1.63% | -0.10% | |
| AUD | 1.42% | 0.15% | 0.05% | 0.65% | 1.43% | -0.27% | 1.30% | |
| NZD | 1.66% | 0.39% | 0.30% | 0.88% | 1.63% | 0.27% | 1.53% | |
| CHF | 0.13% | -1.14% | -1.30% | -0.66% | 0.10% | -1.30% | -1.53% |
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 US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
The Bank of England (BoE) announced on Thursday that it maintained the bank rate at 3.75%, as widely expected. All nine members of the Monetary Policy Committee (MPC) voted in favor of the decision. Markets were expecting two policymakers to vote for a rate cut. In the policy statement, the BoE acknowledged that higher global energy prices are already feeding into petrol prices and said that the MPC stays ready to act as needed to ensure the Consumer Price Index (CPI) inflation remains on track to meet the 2% target and that is has a range of possible responses. GBP/USD rose sharply on Thursday and gained more than 1% before entering a consolidation phase above 1.3400 in the European morning on Friday.
The European Central Bank (ECB) decided to leave key rates unchanged following the March policy meeting, as anticipated. "The war in the Middle East has made outlook significantly more uncertain, creating upside risks for inflation and downside risks for economic growth," the ECB said. In the post-meeting press conference, ECB President Christine Lagarde noted that a prolonged war could increase energy prices for longer and erode incomes. Lagarde added that risks to inflation are tilted to the upside in the near term and said that they could have a "temporary, targeted and tailored" response to the energy shock. EUR/USD gathered bullish momentum and rose 1.2% on Thursday. Early Friday, the pair corrects lower but manages to hold above 1.1550.
Following Wednesday's rally, which was fuelled by the Federal Reserve's hawkish tone, the US Dollar (USD) Index reversed its direction and ended the day deep in negative territory on Thursday. In the European morning on Friday, the USD Index holds steady above 99.00. US stock index futures trade mixed after Wall Street's main indexes closed marginally lower on Thursday.
European Union (EU) leaders called for a moratorium on military strikes on energy and water facilities in the Middle East amid growing concerns about the impact of the Iran war on the global economy, Reuters reported on Thursday. Meanwhile, US Treasury Secretary Scott Bessent told Fox Business Network that the US may "unsanction Iranian oil on water in coming days." Crude oil prices continues to push lower after posting large losses on Thursday. At the time of press, the barrel of West Texas Intermediate (WTI) was trading near 93.50, losing about 1% on the day.
Gold extended its weekly slide on Thursday and touched its lowest level since early February near $4,500. XAU/USD stages a rebound in the European morning on Friday and trades at around $4,700.
USD/JPY gains traction and rises toward 158.50 early Friday after losing more than 1% on Thursday.
USD/CAD struggled to find direction and close virtually unchanged on Thursday. The pair edges lower on Friday but holds slightly above 1.3700. Statistics Canada will publish January Retail Sales data later in the day.
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
There have been remarks from several European Central Bank (ECB) officials during the European trading session on Friday regarding the current state and outlook on inflation and interest rates.
ECB policymaker and President of the Bundesbank Joachim Nagel
As things currently stand, it is conceivable that the medium-term inflation outlook could deteriorate and inflation expectations could rise on a sustained basis, meaning that a more restrictive monetary policy stance would probably be necessary.
ECB would need April hike if price outlook sours.
ECB member and Governor of Bank of Spain José Luis Escrivá
It was very difficult to discern exactly what the impact of this rise in energy prices will be.
The ECB makes decisions based on the medium-term evolution of inflation and sometimes there are situations that subside and do not necessarily entail a change in interest rates.
The situation was highly uncertain and volatile and what we must do is continue to assess a wealth of information.
Market reaction
There seems to be a slight positive impact of comments from ECB officials on the Euro (EUR). EUR/USD rebounds to near 1.1570 from its intraday low of 1.1552, but is still 0.15% down from Thursday's close.
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
- The Indian Rupee slides to a fresh all-time low at 93.90 against the US Dollar.
- Consistent foreign outflows from the Indian stock market have dragged the Indian currency.
- The Fed is expected to hold interest rates steady for longer.
The Indian Rupee (INR) extends its downfall against the US Dollar (USD) on Friday after a holiday the previous day. The USD/INR pair rises to near 93.90 as the Indian currency continues to face significant pressure from consistent foreign outflows from the Indian stock market and higher oil prices amid conflicts in the Middle East, and a decent recovery move in the US Dollar.
FIIs continue to offload their stake in Indian stock market
Overseas investors have been consistently dumping their stake from the Indian stock market as higher oil prices due to the joint assault by the US and Israel against Iran have prompted uncertainty over earnings expectations of the Nifty 50 for the fourth quarter of FY 2025-26.
Theoretically, companies bear the burden of increased input costs by allowing a hit on profit margins or passing on to consumers, which both result in a deviation between projected earnings and actual numbers.
So far in March, Foreign Institutional Investors (FIIs) have remained net sellers on all trading days and offloaded their stake worth Rs. 81,262.5 crore.
The Fed is expected to adopt an extended pause
During the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades almost 0.3% higher to near 99.45. The USD Index recovers from Thursday’s low of around 99.00 amid the speculation that the Federal Reserve (Fed) will hold interest rates at their current levels by the year-end.
According to the CME FedWatch tool, the odds of the Fed holding interest rates steady or above the current range of 3.50%-3.75% in the December meeting are 71.7%. Speculation that the Fed will not cut interest rates the entire year has been intensified by de-anchoring inflation expectations globally amid higher oil prices.
On Thursday, the US Dollar declined over 1% after comments from several global central banks signaled they would also favor tight monetary conditions amid accelerating inflation projections, which diminished fears of likely policy divergence between the Fed and other central banks.
Technical Analysis: USD/INR jumps to near 94.00
USD/INR jumps to near 93.90 on Friday. The near-term bias is bullish as price extends above the rising 20-day Exponential Moving Average (EMA), confirming a short-term uptrend from the late-90 area. The recent surge has stretched the distance from the 20-day EMA, showing strong buying pressure rather than a gradual grind higher.
The 14-day Relative Strength Index (RSI) at 78 signals overbought momentum after a series of higher closes from mid-range readings, indicating trend strength but also a mature leg within this upswing.
Initial resistance sits near 94.00, where the latest impulsive advance faces scope for consolidation, followed by a higher barrier at 94.50 if buyers maintain control. On the downside, immediate support lies near the March 13 high around 93.00, close to the prior breakout region and above the 20-day EMA near 92.35, where pullbacks would test trend integrity. A daily close below 92.30 would weaken the bullish structure and open the way toward secondary support at 91.80, while holding above it keeps focus on resistance retests.
(The technical analysis of this story was written with the help of an AI tool.)
Economic Indicator
Fed Interest Rate Decision
The Federal Reserve (Fed) deliberates on monetary policy and makes a decision on interest rates at eight pre-scheduled meetings per year. It has two mandates: to keep inflation at 2%, and to maintain full employment. Its main tool for achieving this is by setting interest rates – both at which it lends to banks and banks lend to each other. If it decides to hike rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it cuts rates, it tends to weaken the USD as capital drains out to countries offering higher returns. If rates are left unchanged, attention turns to the tone of the Federal Open Market Committee (FOMC) statement, and whether it is hawkish (expectant of higher future interest rates), or dovish (expectant of lower future rates).
Read more.Last release: Wed Mar 18, 2026 18:00
Frequency: Irregular
Actual: 3.75%
Consensus: 3.75%
Previous: 3.75%
Source: Federal Reserve
- The Canadian Dollar trades higher against its major currency peers even as oil prices correct.
- Oil prices retrace as energy supply concerns ease following multiple events.
- The Fed is expected to hold interest rates steady for longer.
The Canadian Dollar (CAD) outperforms its major currency peers, but trades flat against the US Dollar (USD) at around 1.3740 during the European trading session on Friday. The North American currency rises even as oil prices have slightly corrected, following multiple Iran-related events that eased supply concerns.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.15% | 0.10% | 0.41% | -0.07% | -0.01% | -0.12% | 0.11% | |
| EUR | -0.15% | -0.06% | 0.29% | -0.21% | -0.15% | -0.28% | -0.04% | |
| GBP | -0.10% | 0.06% | 0.36% | -0.17% | -0.10% | -0.22% | 0.02% | |
| JPY | -0.41% | -0.29% | -0.36% | -0.48% | -0.43% | -0.55% | -0.30% | |
| CAD | 0.07% | 0.21% | 0.17% | 0.48% | 0.05% | -0.06% | 0.17% | |
| AUD | 0.00% | 0.15% | 0.10% | 0.43% | -0.05% | -0.12% | 0.08% | |
| NZD | 0.12% | 0.28% | 0.22% | 0.55% | 0.06% | 0.12% | 0.24% | |
| CHF | -0.11% | 0.04% | -0.02% | 0.30% | -0.17% | -0.08% | -0.24% |
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 US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Higher oil prices result in higher foreign inflows in the Canadian economy, given that Canada is the largest exporter of oil to the US, which potentially improves the CAD’s appeal.
WTI oil price retraces from $100 as Israel’s pledge to stop targeting Iranian oil infrastructure and comments from United States (US) Treasury Secretary Scott Bessent regarding the likely removal of sanctions on Iran’s oil stuck in the sea have eased oil supply concerns.
On the monetary policy front, investors expect the Bank of Canada (BoC) to hold interest rates steady for longer as risks to inflation and economic growth have both increased.
Meanwhile, the US Dollar is also trading firmly as the Federal Reserve (Fed) is expected to adopt an extended pause amid upside inflation risks. As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.2% higher to near 99.30.
On Thursday, the USD Index fell sharply as global central banks also warned of energy-driven inflation risks, which trimmed hopes of the Fed’s policy divergence with other central banks.
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
- Gold price edges higher to around $4,670 in Friday’s early European session.
- Escalating tensions in the Middle East support the safe-haven flows.
- Concerns about inflationary pressure and liquidity squeeze could weigh on the Gold price.
Gold price (XAU/USD) rebounds to near $4670, snapping the seven-day losing streak during the early European session on Friday. The precious metal edges higher as the ongoing US-Iran conflict spikes demand for safe-haven assets. Traders will closely monitor the situation in the Middle East.
Iranian Foreign Minister Abbas Araghchi vowed to show “ZERO restraint” if the country’s energy infrastructure were hit again, per Bloomberg. Meanwhile, Saudi Foreign Minister Faisal bin Farhan Al Saud warned that the kingdom’s restraint isn’t "unlimited" and added it could take military action. Rising geopolitical risks could boost traditional safe-haven assets such as Gold in the near term.
On the other hand, soaring crude oil and energy prices, driven by the escalating US-Israeli war with Iran, reignite inflation fears. This, in turn, might delay rate cuts and make non-yielding gold less attractive.
The US Federal Reserve (Fed) left interest rates unchanged on Wednesday and expressed concern about the impact of rising oil prices on inflation. Fed Chair Jerome Powell said that the possibility of a rate hike has come up in policy committee discussions. Hawkish remarks from Fed officials lift the US Dollar (USD) and weigh on the USD-denominated commodity price.
Traders could sell liquid assets like yellow metal to cover margin calls and raise cash during the broader market volatility. “Global markets have seen broad selloffs as investors search for the quickest assets to sell, perhaps we are now seeing the next leg of this phase where the perceived safe haven assets are sold to fund purchases of those that may have overacted to the current situation,” said Paul Surguy, managing director and head of investment management and proposition at Kingswood Group.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
- AUD/USD posts modest gains near 0.7090 in Friday’s early European session.
- The pair keeps a neutral with a mild bullish vibe in near term, further consolidation cannot be ruled out with neutral RSI momentum.
- The initial support level is located at 0.7050; the first upside barrier emerges at 0.7125.
The AUD/USD pair trades with mild gains around 0.7090 during the early European session on Friday. The Australian Dollar (AUD) edges higher against the Greenback, following the hawkish stance from the Reserve Bank of Australia (RBA). The RBA raised its Official Cash Rate (OCR) by 25 basis points (bps) to 4.10% at its March meeting on Tuesday. This marks the second consecutive rate hike of the year, following a 25 bps increase in February.
Stronger-than-expected job growth and a steady Unemployment Rate in Australia for February have reinforced the RBA's view that the economy can withstand higher rates. This, in turn, provides some support to the US Dollar (USD) and acts as a tailwind for the pair.
On the other hand, escalating tensions in the US-Israeli war with Iran could drive traders back to safe-haven currencies such as the USD. Israeli Prime Minister Benjamin Netanyahu said on Thursday that Israel "acted alone" in a strike on Iran's South Pars, the world’s largest gas field. Iran has retaliated with missile and drone strikes against Israel and US bases in the region, as well as energy infrastructure in Qatar, Saudi Arabia, and the United Arab Emirates (UAE).
Technical Analysis:
In the daily chart, the near-term bias of AUD/USD is neutral with a mild bullish tilt, as price continues to consolidate just above the upper half of the recent Bollinger Band envelope while holding well above the rising 100-day exponential moving average near 0.6860. The upper band is flattening after a prior expansion, indicating fading upside momentum but not a clear reversal. RSI has eased back toward the mid-50s from overbought territory, signaling that the earlier bullish impulse is losing strength but downside pressure is not yet dominant.
Immediate support emerges around 0.7050, where the lower intraday swing area converges with the mid-portion of the Bollinger structure, followed by stronger support near 0.7000. A break below these levels would expose the 0.6920–0.6900 region, closer to the 100-day EMA, as the next downside objective. On the topside, initial resistance stands at 0.7125, aligned with recent closing highs and just beneath the upper Bollinger Band, with a subsequent barrier near 0.7150. A daily close above 0.7150 would reopen the topside and strengthen the bullish case toward the 0.7200 area.
(The technical analysis of this story was written with the help of an AI tool.)
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.
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