The Australian Dollar (AUD) remains steady on Wednesday after experiencing losses in the previous session. The AUD/USD pair holds its ground as the US Dollar (USD) stays firm, supported by stable US yields ahead of the Federal Reserve’s (Fed) interest rate decision later in the day. No changes in rates are expected amid persistent inflation concerns and heightened economic uncertainty.
Australia's Westpac Leading Economic Index increased by 0.1% month-over-month in February 2025, maintaining the same pace as the previous month. Meanwhile, the six-month annualized growth rate in the index, which forecasts economic activity relative to the trend over the next three to nine months, rose to 0.8% from 0.6% in January.
Treasurer Jim Chalmers addressed trade tensions in a speech on Tuesday, rejecting a "race to the bottom" on tariffs. Chalmers criticized the Trump administration’s trade policies as "self-defeating and self-sabotaging," emphasizing Australia’s need to focus on economic resilience rather than retaliation. He also condemned the US decision to exclude Australia from steel and aluminum tariff exemptions, calling it "disappointing, unnecessary, senseless, and wrong," as per "The Guardian".
On Monday, Reserve Bank of Australia (RBA) Assistant Governor (Economic) Sarah Hunter reiterated the central bank’s cautious stance on rate cuts. The RBA’s February statement signaled a more conservative approach than market expectations, with a strong focus on monitoring US policy decisions and their potential impact on Australia’s inflation outlook.
The AUD/USD pair is trading around 0.6360 on Wednesday, maintaining its bullish trajectory as it continues to climb within the ascending channel on the daily chart. The 14-day Relative Strength Index (RSI) remains above 50, reinforcing the positive momentum.
On the upside, the AUD/USD pair may attempt to retest its three-month high of 0.6408, last reached on February 21. A breakout above this level could strengthen the bullish bias, potentially driving the pair toward the upper boundary of the ascending channel near 0.6490.
Key support lies at the nine-day Exponential Moving Average (EMA) of 0.6334, aligned with the lower boundary of the ascending channel. Further support is seen at the 50-day EMA at 0.6312. A decisive break below this critical zone could weaken the bullish outlook, exposing the AUD/USD pair to further downside pressure toward the six-week low of 0.6187, recorded on March 5.
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Japanese Yen.
USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
---|---|---|---|---|---|---|---|---|
USD | 0.03% | 0.03% | 0.10% | 0.03% | -0.06% | 0.06% | 0.03% | |
EUR | -0.03% | -0.01% | 0.08% | -0.00% | -0.08% | 0.03% | 0.00% | |
GBP | -0.03% | 0.01% | 0.10% | 0.01% | -0.06% | 0.03% | -0.00% | |
JPY | -0.10% | -0.08% | -0.10% | -0.10% | -0.17% | -0.09% | -0.10% | |
CAD | -0.03% | 0.00% | -0.01% | 0.10% | -0.07% | 0.05% | -0.01% | |
AUD | 0.06% | 0.08% | 0.06% | 0.17% | 0.07% | 0.11% | 0.11% | |
NZD | -0.06% | -0.03% | -0.03% | 0.09% | -0.05% | -0.11% | -0.04% | |
CHF | -0.03% | -0.01% | 0.00% | 0.10% | 0.01% | -0.11% | 0.04% |
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 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).
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
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