AUD/USD slumps to near 0.6220 on soft Aussie CPI, Fed policy in focus

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Australian Dollar depreciates despite stronger Judo Bank PMI, Bullock’s cautious speech – Crypto News

Published

3 days ago

February 21, 2025

Dripp

The Australian Dollar declines as the US Dollar experiences a technical upward correction.
Australia’s Judo Bank Manufacturing PMI increased to 50.6 in February, up from 50.2 in January.
RBA’s Bullock warned that an overly rapid or excessive monetary policy easing could hinder the disinflation process.

The Australian Dollar (AUD) edges lower against the US Dollar (USD) following the release of Judo Bank’s Purchasing Managers Index (PMI) on Friday. However, the AUD/USD pair saw gains after US President Donald Trump announced potential progress in trade negotiations with China, easing market concerns over tariffs.

Australia’s Judo Bank Manufacturing PMI rose to 50.6 in February, up from 50.2 in January. The Services PMI improved to 51.4 from 51.2, while the Composite PMI edged up to 51.2 from 51.1.

Reserve Bank of Australia (RBA) Governor Michele Bullock cautioned that easing monetary policy too quickly or excessively could stall disinflation, potentially keeping inflation above the target midpoint. Bullock emphasized the RBA’s commitment to data-driven decisions and careful risk assessment, suggesting that while rate cuts remain a possibility, a cautious approach is necessary.

Australian Dollar appreciated as US Dollar struggled following weak US jobless claims

The US Dollar Index (DXY), which measures the USD against six major currencies, gains ground near 106.50 at the time of writing. However, the DXY faced challenges following weak US jobless claims data and mixed Federal Reserve (Fed) commentary.
US Initial Jobless Claims for the week ending February 14 rose to 219,000, exceeding the expected 215,000. Meanwhile, Continuing Jobless Claims increased to 1.869 million, slightly below the forecast of 1.87 million.
Federal Reserve Board Governor Adriana Kugler stated on Thursday that US inflation still has “some way to go” before reaching the central bank’s 2% target, noting that the path remains uncertain, according to Reuters.
St. Louis Fed President Alberto Musalem cautioned about potential stagflation risks and rising inflation expectations. Meanwhile, Atlanta Fed President Raphael Bostic kept the possibility of two rate cuts this year open, contingent on economic developments.
President Trump indicated that a new trade deal with China is possible and expects Chinese President Xi Jinping to visit. He also mentioned discussions with China regarding TikTok and noted that his administration is considering a 25% tariff on lumber and forest products.
The latest Federal Open Market Committee (FOMC) Meeting Minutes reaffirmed the decision to keep interest rates unchanged in January. Policymakers emphasized the need for more time to assess economic activity, labor market trends, and inflation before considering any rate adjustments. The committee also agreed that clear signs of declining inflation are necessary before implementing rate cuts.
President Trump has confirmed that a 25% tariff on pharmaceutical and semiconductor imports will take effect in April. Additionally, he reaffirmed that auto tariffs will remain at 25%, further escalating global trade tensions.
The Australian Bureau of Statistics (ABS) reported on Thursday that Australia’s seasonally adjusted Unemployment Rate rose to 4.1% in January from 4.0% in December, aligning with market expectations. Additionally, Employment Change came in at 44K for January, down from a revised 60K in December (previously 56.3K), but still exceeding the consensus forecast of 20K.
Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser stated while speaking to Bloomberg News on Thursday that the central bank’s policy “is still restrictive.” Hauser noted that the latest jobs data showed little cause for concern.
The Reserve Bank of Australia (RBA) lowered its Official Cash Rate (OCR) by 25 basis points to 4.10% on Tuesday—the first rate cut in four years. RBA Governor Michele Bullock acknowledged the impact of high interest rates but cautioned that it was too soon to declare victory over inflation. She also emphasized the strength of the labor market and clarified that future rate cuts are not guaranteed, despite market expectations.

Technical Analysis: Australian Dollar tests psychological barrier at 0.6400

The AUD/USD pair hovers around 0.6400 on Friday, trading within an ascending channel that suggests a bullish market sentiment. The 14-day Relative Strength Index (RSI) remains above 50, reinforcing the positive outlook.

On the upside, the AUD/USD pair tests the key psychological resistance at 0.6400, followed by the ascending channel’s upper boundary at 0.6420.

Immediate support could be at the nine-day Exponential Moving Average (EMA) of 0.6350, followed by the 14-day EMA at 0.6330. A stronger support zone lies near the channel’s lower boundary at 0.6320.

AUD/USD: Daily Chart

Australian Dollar PRICE Today

The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the US Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.15%	0.11%	0.45%	0.08%	0.16%	0.09%	0.18%
EUR	-0.15%		-0.05%	0.32%	-0.07%	-0.01%	-0.07%	0.02%
GBP	-0.11%	0.05%		0.38%	-0.02%	0.04%	-0.02%	0.07%
JPY	-0.45%	-0.32%	-0.38%		-0.34%	-0.29%	-0.36%	-0.27%
CAD	-0.08%	0.07%	0.02%	0.34%		0.06%	0.00%	0.09%
AUD	-0.16%	0.00%	-0.04%	0.29%	-0.06%		-0.06%	0.02%
NZD	-0.09%	0.07%	0.02%	0.36%	-0.01%	0.06%		0.08%
CHF	-0.18%	-0.02%	-0.07%	0.27%	-0.09%	-0.02%	-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 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).

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.