- The Australian dollar rose after the release of economic figures from China.
- China’s GDP grew 5.4% year-on-year in the fourth quarter of 2024 after announcing a 4.6% expansion in the third quarter.
- US retail sales rose 0.4% month-on-month in December, versus expected growth of 0.6%.
The Australian Dollar (AUD) rose against the US Dollar (USD) following economic data released by China on Friday. The Chinese economy grew by 5.4% year-on-year in the fourth quarter of 2024 after announcing a 4.6% expansion in the third quarter. The data exceeded market expectations of 5% in the reporting period by a wide margin.
China’s GDP rose 1.6% on a quarterly basis in the fourth quarter of 2024, after increasing 0.9% in the previous quarter. This figure is in line with expectations of 1.6%. Annual retail sales for December rose 3.7% versus 3.5% expected and 3% previously, while industrial production came in at 6.2% versus 5.4% and 5.4% expected for November.
Australia’s seasonally adjusted unemployment rate rose to 4.0% in December, compared to 3.9% in November, in line with market expectations. Employment rose by 56.3K in December, compared to 28.2K in November (revised from 35.6K) and significantly exceeds market expectations of 15.0K.
Bjorn Jarvis, head of labor statistics at the Australian Bureau of Statistics, highlighted key data points: “The employment-to-population ratio rose 0.1% percentage point to a new record high of 64.5%. This was 0.5 percentage point higher than 1 year ago and 2 .3%”. Points above pre-COVID-19 levels, the increase in both employment and unemployment led to a further rise in the participation rate, which reflects the proportion of the population working or actively seeking work.
The Australian dollar advances as the US dollar remains weak amid weaker US retail sales data
- The US Dollar Index (DXY), which measures the performance of the US dollar against six major currencies, is trading near 109.00. The US dollar fell after weaker US retail sales data.
- US retail sales rose 0.4% month over month in December, reaching $729.2 billion. This reading was weaker than market expectations for an increase of 0.6% and lower than the previous reading of 0.8% (revised from 0.7%).
- Chicago Federal Reserve Bank President Austan Goolsbee said Thursday that he has become increasingly confident over the past few months that the labor market is stabilizing at a level resembling full employment, rather than deteriorating into something worse, according to Reuters.
- The US Consumer Price Index rose 2.9% year-on-year in December, up from 2.7% in November, in line with market expectations. On a monthly basis, the CPI rose by 0.4%, after a 0.3% increase in the previous month.
- The core U.S. CPI, which excludes volatile food and energy prices, rose 3.2% annually in December, just below the November figure and analysts’ expectations of 3.3%. On a monthly basis, the core CPI rose 0.2% in December 2024.
- The US Producer Price Index for final demand rose 0.2% month-on-month in December after an unrevised 0.4% rise in November, lower than the expected 0.3%. The producer price index rose 3.3% year-on-year in December, the largest rise since February 2023, after rising 3.0% in November. This reading was lower than expectations of 3.4%.
- Scott Besent, Donald Trump’s nominee for Treasury Secretary, on Wednesday stressed the importance of maintaining the US dollar as the global reserve currency for the country’s economic stability and future prosperity. Besant stated that “productive investment that grows the economy should take priority over wasteful spending that leads to inflation,” according to Bloomberg.
- Economic activity saw slight to moderate growth across the 12 Fed districts in late November and December, the Federal Reserve reported in its latest Beige Book survey, released Wednesday. Consumer spending rose moderately, driven by strong holiday sales that beat expectations. However, manufacturing activity saw a slight decline overall, as some manufacturers stockpiled inventories in anticipation of higher tariffs.
- Michelle Bowman, a member of the Federal Reserve Board of Governors, added her voice to a group of Fed spokespeople last week, as policymakers work double duty to try to temper market reactions to a tougher pace of interest rate cuts in 2025 than many Fed participants expected. Previously the market.
- Australia’s Westpac Consumer Confidence Index fell 0.7% to 92.1 points, reflecting continued consumer pessimism. The decline in consumer confidence has raised concerns about the outlook for interest rates and broader economic health in Australia. Markets now expect a 67% probability that the RBA will cut its 4.35% cash rate by 25 basis points in February, with a full rate cut expected by April.
Technical Analysis: The Australian dollar remains above the 0.6200 support level near the 14-day EMA
The AUD/USD pair is trading near the 0.6220 level on Friday, trying to break out of the descending channel on the daily chart. A successful breakout would weaken the prevailing bearish bias. The 14-day RSI is also trending higher towards the 50 level, indicating potential recovery momentum.
The AUD/USD pair is facing immediate resistance at the upper border of the descending channel, at around 0.6220.
On the downside, initial support is seen at the 14-day Exponential Moving Average (EMA) at 0.6213, followed by the nine-day EMA at 0.6206. A more important support level is located near the lower border of the descending channel, around the 0.5920 level.
AUD/USD: daily chart
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 strongest against the Japanese yen.
| US dollars | euro | GBP | JPY | Canadian | Australian dollar | New Zealand dollar | Swiss franc | |
|---|---|---|---|---|---|---|---|---|
| US dollars | -0.05% | -0.05% | 0.12% | 0.01% | -0.03% | -0.07% | -0.04% | |
| euro | 0.05% | -0.01% | 0.19% | 0.06% | 0.01% | -0.02% | 0.00% | |
| GBP | 0.05% | 0.01% | 0.17% | 0.07% | 0.03% | -0.01% | 0.01% | |
| JPY | -0.12% | -0.19% | -0.17% | -0.10% | -0.16% | -0.21% | -0.18% | |
| Canadian | -0.01% | -0.06% | -0.07% | 0.10% | -0.05% | -0.08% | -0.06% | |
| Australian dollar | 0.03% | -0.01% | -0.03% | 0.16% | 0.05% | -0.04% | -0.02% | |
| New Zealand dollar | 0.07% | 0.02% | 0.01% | 0.21% | 0.08% | 0.04% | 0.03% | |
| Swiss franc | 0.04% | -0.00% | -0.01% | 0.18% | 0.06% | 0.02% | -0.03% |
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, as well as Australia’s inflation, growth rate and 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 ones do the opposite. 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 and raises 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.
