Key Moments
- AUD/USD trades near 0.6995, rising 0.73% on Friday as demand for the Australian Dollar recovers.
- Comments from RBA Governor Michele Bullock bolster expectations of another rate hike, potentially as early as May.
- The US Dollar Index slips to 97.68, pressured by softer labor data and rising Fed rate-cut expectations.
RBA Signals Support Australian Dollar Recovery
AUD/USD rebounds on Friday, with the pair trading around 0.6995 at the time of writing, up 0.73% on the session. The move marks a turnaround after earlier weakness driven by a broad sell-off in global equities and other risk-sensitive assets.
The Australian Dollar had recently come under pressure amid elevated risk aversion tied to a pullback in technology stocks and concerns about substantial investment in artificial intelligence. As a currency often viewed as a liquid proxy for global risk appetite, the Australian Dollar had been sidelined in favor of traditional safe havens.
Support for the currency improved following remarks from Reserve Bank of Australia (RBA) Governor Michele Bullock. She said the board had lifted the policy rate because the Australian economy is more capacity-constrained than previously understood, necessitating a more restrictive monetary stance. Bullock added that the central bank needs to slow demand growth unless supply capacity increases more quickly. These comments reignited expectations for an additional rate increase, with markets now assigning a higher probability to further tightening as early as May.
Domestic Data Underscore Resilience in Australian Economy
Recent Australian macroeconomic releases have contributed to the more constructive tone around the currency. Australia’s Trade Balance widened to AUD 3.373 billion in December from AUD 2.597 billion, slightly exceeding market forecasts. Exports increased 1.0% month-on-month, led mainly by metals and mineral ores, while imports declined 0.8%, signaling weaker domestic demand.
In parallel, S&P Global PMI data indicate a sharp pickup in services sector activity, reinforcing the perception that the Australian economy remains resilient despite tighter financial conditions.
Softening US Data Undermine Dollar Strength
On the US side, the Dollar continues to lose ground. The US Dollar Index (DXY) falls 0.28% on Friday to trade around 97.68 at the time of writing, reversing after two consecutive sessions of gains.
Recent US labor market indicators point toward a cooling jobs environment and have strengthened expectations for monetary easing by the Federal Reserve. Weekly Initial Jobless Claims rose to 231,000, while the ADP measure of private sector job creation fell well short of expectations.
Although some Fed officials emphasize caution and highlight that inflation has not yet shown clear, sustained moderation, markets still anticipate rate cuts later this year. This environment caps the US Dollar’s recovery potential and enables AUD/USD to remain higher, as market participants look ahead to new macroeconomic signals, including upcoming US consumer sentiment data.
Australian Dollar Performance Against Majors
The following table shows the Australian Dollar’s percentage change against major currencies today. The Australian Dollar was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.35% | -0.49% | -0.13% | -0.47% | -0.93% | -0.87% | -0.35% | |
| EUR | 0.35% | -0.14% | 0.24% | -0.12% | -0.57% | -0.51% | 0.00% | |
| GBP | 0.49% | 0.14% | 0.38% | 0.02% | -0.43% | -0.38% | 0.14% | |
| JPY | 0.13% | -0.24% | -0.38% | -0.34% | -0.80% | -0.75% | -0.22% | |
| CAD | 0.47% | 0.12% | -0.02% | 0.34% | -0.46% | -0.41% | 0.13% | |
| AUD | 0.93% | 0.57% | 0.43% | 0.80% | 0.46% | 0.06% | 0.59% | |
| NZD | 0.87% | 0.51% | 0.38% | 0.75% | 0.41% | -0.06% | 0.53% | |
| CHF | 0.35% | -0.01% | -0.14% | 0.22% | -0.13% | -0.59% | -0.53% |
The heat map illustrates percentage moves between major currencies. The base currency is taken from the left-hand column and the quote currency from the top row. For instance, selecting the Australian Dollar as the base on the left and moving horizontally to the US Dollar column shows the percentage move for AUD (base)/USD (quote).
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