Forex News
- AUD/USD stages a modest recovery from a two-week low, around 0.7100, touched on Wednesday.
- The Fed’s hawkish tilt and Iran tensions continue to underpin the USD, warranting caution for bulls.
- The technical setup suggests that any further move up is likely to be sold into and remain capped.
The AUD/USD pair gains some positive traction during the Asian session on Thursday and recovers a part of the previous day's heavy losses to the 0.7100 mark, or a two-week low.
Expectations that the Reserve Bank of Australia (RBA) will stick to its hawkish stance counter China's mixed official PMIs and turn out to be a key factor offering some support to the Australian Dollar (AUD). The US Dollar (USD), on the other hand, sticks to its positive tone near the highest level since April 13 on the back of persistent geopolitical uncertainties stemming from stalled US-Iran peace talks. Furthermore, diminishing odds for any further policy easing by the US Federal Reserve (Fed) underpin the USD and should cap the upside for the AUD/USD pair.
From a technical perspective, spot prices have repeatedly failed to find acceptance above the 0.7200 mark and have oscillated in a range over the past two weeks or so. Meanwhile, the overnight slide confirms a breakdown below the 0.7130-0.7125 confluence – comprising the 100-period Simple Moving Average (SMA) on the 4-hour chart and the 23.6% Fibonacci retracement level of the recent recovery from the year-to-date low touched in March. This, in turn, favors the AUD/USD bears, suggesting that the move higher might now be seen as a selling opportunity.
Moreover, the Relative Strength Index (RSI) holds around 40 and hints at modest bearish momentum. Meanwhile, the Moving Average Convergence Divergence (MACD) is in negative territory but flattening, suggesting downside pressure is softening rather than accelerating.
In the meantime, immediate resistance emerges at the 23.6% Fibonacci retracement at 0.7131, with a stronger barrier at the recent cycle high near 0.7223. On the downside, initial support aligns with the 0.7100 mark ahead of the 38.2% retracement at 0.7074. This is followed by the 50.0% level at 0.7027 and deeper supports at the 61.8% and 78.6% retracements at 0.6981 and 0.6915, respectively, where buyers would likely attempt to slow any extended pullback.
(The technical analysis of this story was written with the help of an AI tool.)
AUD/USD 4-hour chart
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 Euro.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.11% | 0.00% | 0.00% | -0.04% | -0.11% | -0.08% | -0.01% | |
| EUR | -0.11% | -0.07% | -0.13% | -0.16% | -0.21% | -0.17% | -0.10% | |
| GBP | -0.01% | 0.07% | -0.02% | -0.08% | -0.12% | -0.09% | -0.02% | |
| JPY | 0.00% | 0.13% | 0.02% | -0.06% | -0.11% | -0.13% | -0.04% | |
| CAD | 0.04% | 0.16% | 0.08% | 0.06% | -0.08% | -0.06% | 0.04% | |
| AUD | 0.11% | 0.21% | 0.12% | 0.11% | 0.08% | 0.04% | 0.12% | |
| NZD | 0.08% | 0.17% | 0.09% | 0.13% | 0.06% | -0.04% | 0.08% | |
| CHF | 0.00% | 0.10% | 0.02% | 0.04% | -0.04% | -0.12% | -0.08% |
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).
- WTI rises amid an intensifying naval blockade of Iranian ports.
- Canada’s oil sector draws renewed major interest as Middle East tensions boost its appeal to global operators.
- President Trump said Wednesday that the naval blockade on Iran will continue until Tehran agrees to a nuclear deal.
West Texas Intermediate (WTI) oil price extends its gains for the fourth consecutive day, trading around $105.70 per barrel during the Asian hours on Thursday. Crude oil prices climb as a deepening naval blockade of Iranian ports.
US President Donald Trump stated on Wednesday that the naval blockade of Iran will remain in place until a deal is reached with Tehran over its nuclear program, according to Bloomberg. He dismissed proposals to reopen the key shipping route, arguing that economic pressure is more effective than military strikes.
Iranian officials have warned of retaliation if the blockade continues, accusing Trump of trying to force Tehran into compliance through economic coercion and internal destabilization efforts.
Data from the US Energy Information Administration (EIA) showed crude inventories fell sharply by 6.233 million barrels in the week ending April 24, reversing the previous increase of 1.925 million barrels. At the same time, oil exports jumped to record levels above 6 million barrels per day, pointing to tightening global supply conditions.
Canada’s oil and gas sector is drawing renewed interest from global energy majors as rising Middle East tensions boost its attractiveness to major operators. Shell’s $16.4 billion acquisition of ARC Resources highlights this trend, while TotalEnergies and ConocoPhillips are re-evaluating Canadian peers alongside Equinor and BP.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
- GBP/USD bulls seem hesitant as the Fed’s hawkish tilt and the US-Iran tensions underpin the USD.
- Bets for two BoE rate hikes in 2026 offer support to the GBP and act as a tailwind for spot prices.
- Traders also seem reluctant ahead of the BoE decision and the crucial US PCE Price Index data.
The GBP/USD pair struggles to capitalize on a modest Asian session uptick to the 1.3500 neighborhood, though it holds above the 100-day Simple Moving Average (SMA). Spot prices currently trade around the 1.3475-1.3480 region, nearly unchanged for the day, as traders look forward to the Bank of England (BoE) event and the US inflation data for a fresh impetus.
The UK central bank is scheduled to announce its policy decision later today and is expected to keep interest rates on hold. The current market pricing, however, points to a greater possibility of two rate hikes in 2026 amid inflation risks stemming from the war-driven surge in energy prices. Hence, the focus will be on the accompanying policy statement and the post-meeting press conference, where comments from BoE Governor Andrew Bailey will be scrutinized for cues about the interest rate path. The outlook, in turn, will play a key role in influencing the British Pound (GBP).
Traders will further take cues from the US Personal Consumption Expenditures (PCE) Price Index, which should further provide some meaningful impetus to the GBP/USD pair later today. In the meantime, the US Federal Reserve's (Fed) hawkish tilt, along with the US-Iran stalemate, might continue to act as a tailwind for the US Dollar (USD) and cap the upside for the currency pair. The Fed's decision to keep interest rates unchanged on Wednesday saw the highest number of dissents since 1992, with three policymakers voting against the accommodative tone in the policy statement.
Traders were quick to reduce bets on any further easing by the Fed in 2026; instead, they are now pricing in over a 10% chance of a rate increase by the year-end. On the geopolitical front, US President Donald Trump rejected Iran's new proposal to end the two-month conflict and reiterated that there will be no peace deal with the Islamic Republic unless it agrees to give up the nuclear program. Trump further added that the naval blockade of Iranian ports will continue, which keeps geopolitical risks in play. This, in turn, favors the USD bulls and should keep a lid on the GBP/USD pair.
Economic Indicator
BoE's Governor Bailey speech
Andrew Bailey is the Bank of England's Governor. He took office on March 16th, 2020, at the end of Mark Carney's term. Bailey was serving as the Chief Executive of the Financial Conduct Authority before being designated. This British central banker was also the Deputy Governor of the Bank of England from April 2013 to July 2016 and the Chief Cashier of the Bank of England from January 2004 until April 2011.
Read more.Next release: Thu Apr 30, 2026 11:30
Frequency: Irregular
Consensus: -
Previous: -
Source: Bank of England
- EUR/USD may hover near its eight-month low around 1.1411.
- The 14-day Relative Strength Index near 48 signals weakening bullish momentum and a consolidative trend.
- Immediate resistance is seen at the 50-day EMA near 1.1678.
EUR/USD extends its losses for the third successive day, trading around 1.1660 during the Asian hours on Thursday. The daily chart technical analysis indicates a potential for a bearish reversal, as the pair has slipped below the ascending channel.
The EUR/USD pair holds just under the 50-day Exponential Moving Average (EMA) and the nine-day EMA, which together suggest a capped near-term tone despite the recent recovery from lower levels.
The 14-day Relative Strength Index (RSI) around 48 hints at fading bullish momentum and a consolidative bias, reinforcing the view that upside attempts may struggle while price remains below these key dynamic barriers.
On the downside, the EUR/USD pair may navigate the region around the eight-month low of 1.1411, recorded on March 13.
The immediate resistance lies at the 50-day EMA of 1.1678, followed by the nine-day EMA at 1.1700. A return to the ascending channel would revive the bullish bias and lead the EUR/USD pair to test the two-month high of 1.1849, reached on April 17, followed by the upper boundary of the ascending channel around 1.1940. A sustained break above the channel would lead the pair to explore the region around 1.2082, the highest since June 2021, reached on January 27.
(The technical analysis of this story was written with the help of an AI tool.)
Euro Price Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the weakest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.09% | 0.01% | -0.03% | -0.05% | -0.14% | -0.07% | -0.00% | |
| EUR | -0.09% | -0.05% | -0.13% | -0.14% | -0.21% | -0.14% | -0.07% | |
| GBP | -0.01% | 0.05% | -0.04% | -0.07% | -0.15% | -0.05% | -0.02% | |
| JPY | 0.03% | 0.13% | 0.04% | -0.03% | -0.10% | -0.09% | -0.00% | |
| CAD | 0.05% | 0.14% | 0.07% | 0.03% | -0.10% | -0.04% | 0.05% | |
| AUD | 0.14% | 0.21% | 0.15% | 0.10% | 0.10% | 0.07% | 0.15% | |
| NZD | 0.07% | 0.14% | 0.05% | 0.09% | 0.04% | -0.07% | 0.07% | |
| CHF | 0.00% | 0.07% | 0.02% | 0.00% | -0.05% | -0.15% | -0.07% |
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 Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
- US Dollar Index flat lines around 98.95 in Thursday’s Asian session.
- Fed held rates steady at its April meeting; Jerome Powell will remain on board.
- The preliminary reading of the US Q1 GDP and PCE Price Index inflation report will be in the spotlight later on Thursday.
The US Dollar Index (DXY), an index of the value of the US Dollar (USD) measured against a basket of six world currencies, currently trades near 98.95 during the Asian trading hours on Thursday. The DXY steadies following a hawkish hold from the US Federal Reserve (Fed).
The US central bank on Wednesday kept the key interest rate in a range between 3.50% and 3.75%. The Fed's 8–4 decision to leave the rate unchanged was its most divided since 1992, drawing three dissents from officials who no longer think the bank should communicate a bias towards easing.
In his final meeting as Chair before his term ended on May 15, Jerome Powell warned that near-term inflation expectations are rising. Powell further stated that he would stay on the Board of Governance for an indefinite period, even after his chairmanship ends.
Markets are now pricing in nearly a 55% probability of a Fed rate hike by April 2027, sharply up from roughly 20% before the decision, according to Reuters.
Traders will take more cues from the preliminary reading of the US Gross Domestic Product (GDP) for the first quarter (Q1) and the Personal Consumption Expenditures (PCE) Price Index inflation report for March, which will be published later on Thursday. If the reports come in better than expected, this could lift the US Dollar against its rivals in the near term.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
- USD/CAD may rise as the oil-sensitive Canadian Dollar faces pressure from falling crude prices.
- Canada’s oil sector draws renewed major interest as Middle East tensions boost its appeal to global operators.
- The Greenback may recover as hawkish Fed signals and ongoing geopolitical tensions boost safe-haven demand.
USD/CAD edges lower after remaining flat in the previous day, trading around 1.3680 during the Asian hours on Thursday. However, the downside for the pair could be limited, as the commodity-linked Canadian Dollar (CAD) may face challenges amid declining oil prices, given Canada’s status as the largest crude exporter to the United States (US).
West Texas Intermediate (WTI) oil price declines after three days of gains, trading around $104.00 per barrel at the time of writing. However, crude oil prices could rebound amid a worsening naval blockade of Iranian ports and the United Arab Emirates’ (UAE) unexpected exit from the Organization of the Petroleum Exporting Countries (OPEC).
Canada’s oil and gas sector is attracting renewed attention from global energy majors as escalating Middle East tensions enhance the country’s appeal to leading operators. Shell’s $16.4 billion deal to acquire ARC Resources underscores this shift, while TotalEnergies and ConocoPhillips are reassessing Canadian peers alongside Equinor and BP.
The USD/CAD pair depreciates as the US Dollar (USD) edges lower after two days of gains. However, the Greenback may regain its ground as Federal Reserve policymakers struck a hawkish tone in their rate hold and persistent geopolitical tensions supported the safe-haven demand for the currency.
The Federal Open Market Committee (FOMC) voted 8-4 on Wednesday to keep interest rates unchanged within the 3.5%–3.75% range, marking the first instance of four dissenting votes since October 1992. The committee emphasized that “inflation remains elevated, partly due to the recent rise in global energy prices.”
Federal Reserve (Fed) Chair Jerome Powell remarked during the post-meeting press conference that he intends to remain on the Board of Governors for an indefinite period even after his tenure as chair concludes. Meanwhile, Kevin Warsh, nominated by Donald Trump as his successor, is widely seen as positioned to assume leadership at the central bank.
The story was corrected on April 30 at 2:25 GMT to say in the second paragraph that WTI is trading around $104.00 per barrel, not per troy ounce.)
Canadian Dollar FAQs
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
China's RatingDog Manufacturing Purchasing Managers' Index (PMI) climbed to 52.2 in April from 50.8 in March, the latest data published by RatingDog showed on Thursday.
The market forecast was for a 51.0 reading.
AUD/USD reaction to China’s PMI data
At the time of writing, the AUD/USD pair is trading around 0.7122, up 0.08% on the day.
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.
- USD/JPY weakens to near 160.25 in Thursday’s Asian session.
- Japanese authorities are on high alert for currency intervention as the Japanese Yen hovers near the key level.
- The Fed held interest rates steady at 3.5% to 3.75% following its April policy meeting.
The USD/JPY pair loses traction to around 160.25 during the Asian trading hours on Thursday. The Japanese Yen (JPY) edges higher against the US Dollar (USD) amid intervention fears from Japanese authorities. Traders await the preliminary reading of the US Gross Domestic Product (GDP) for the first quarter (Q1) and the Personal Consumption Expenditures (PCE) Price Index inflation report for March, which are due later on Thursday.
The Bank of Japan (BoJ) decided to leave interest rates unchanged at 0.75% on Tuesday, as widely expected. Governor Kazuo Ueda signaled readiness to raise rates to fight broader inflation, but the JPY barely moved.
"I don't expect the situation of negative real interest rates to change," said Sho Suzuki, market analyst at Matsui Securities in Tokyo. "So I believe there is a high likelihood that the yen will remain weak," he added.
While no formal intervention has been confirmed this week, Japanese officials are on high alert for currency intervention as the Japanese Yen hovers near the critical level. Japanese Finance Minister Satsuki Katayama highlighted a "high sense of urgency" regarding speculative and weak-JPY moves driven by Middle East tensions.
On the USD’s front, the US Federal Reserve (Fed) on Wednesday held the interest rates in a range of 3.5% to 3.75% at its April meeting. That marked the first time four FOMC members dissented since October 1992. The committee noted that "inflation is elevated, in part reflecting the recent increase in global energy prices.”
During a press conference, Fed Chair Jerome Powell said that he will continue to serve as a Fed governor for an indefinite period even after his chairmanship ends. Kevin Warsh, Trump’s nominated successor, appears on track to take over for Powell at the central bank.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
China’s official Manufacturing Purchasing Managers' Index (PMI) eased to 50.3 in April, compared to 50.4 in the previous reading. The reading came in above the market consensus of 50.1 in the reported month.
The NBS Non-Manufacturing PMI fell to 49.4 in April versus March’s 50.1 figure. The market forecast was for a 49.9 print.
Market reaction
At the time of writing, the AUD/USD pair is trading around 0.7125, up 0.10% on the day.
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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