Key Takeaways
- Australia’s trade surplus widened significantly in September to A$3,938 million, exceeding market expectations.
- Exports saw a substantial month-on-month increase of 7.9%, while imports experienced a modest rise of 1.1%.
- This positive trade data could provide support for the Australian Dollar (AUD).
Australia’s trade surplus expanded in September, reaching A$3,938 million. This figure surpassed the A$3,850 million forecast and showed a considerable increase from the revised A$1,111 million recorded in August.
Detailed foreign trade data, published by the Australian Bureau of Statistics, indicates that Australian exports climbed by 7.9% in September compared to the previous month. This follows a 8.7% decrease observed in August.
Concurrently, imports rose by 1.1% month-on-month in September. This contrasts with a 3.3% increase recorded in August.
Market Reaction to Australia’s Trade Balance
Following the release of the trade data, the AUD/USD currency pair experienced a slight dip, trading down 0.04% for the day at 0.6502 at the time of reporting.
Australian Dollar Price Performance (Last 7 Days)
The table below illustrates the percentage change of the Australian Dollar (AUD) against major currencies over the past seven days. Notably, the Australian Dollar showed the strongest performance against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.91% | 1.04% | 0.85% | 1.17% | 1.06% | 1.78% | 1.21% | |
| EUR | -0.91% | 0.17% | -0.11% | 0.26% | 0.19% | 0.88% | 0.30% | |
| GBP | -1.04% | -0.17% | -0.24% | 0.08% | 0.02% | 0.70% | 0.12% | |
| JPY | -0.85% | 0.11% | 0.24% | 0.30% | 0.22% | 0.90% | 0.48% | |
| CAD | -1.17% | -0.26% | -0.08% | -0.30% | -0.09% | 0.61% | 0.04% | |
| AUD | -1.06% | -0.19% | -0.02% | -0.22% | 0.09% | 0.68% | 0.08% | |
| NZD | -1.78% | -0.88% | -0.70% | -0.90% | -0.61% | -0.68% | -0.57% | |
| CHF | -1.21% | -0.30% | -0.12% | -0.48% | -0.04% | -0.08% | 0.57% |
This heatmap displays the percentage changes of major currencies against each other. The base currency is selected from the left column, and the quote currency from the top row. For instance, selecting the Australian Dollar from the left column and moving horizontally to the US Dollar shows the percentage change for AUD (base) against USD (quote).
This analysis was initially published on November 5 at 22:30 GMT, providing a preview of the Australian Trade Data release.
The Australian Trade Data Overview
The Australian Bureau of Statistics was scheduled to release August data on Thursday at 00:30 GMT. Trade surplus was anticipated to widen to A$3,850 million in September, an increase from the A$1,825 million reported in the previous period.
The trade balance offers an early indicator of a nation’s net export performance. A consistent demand for Australian exports typically leads to positive growth in the trade balance, which is generally considered favorable for the Australian Dollar (AUD).
Potential Impact of Australian Trade Data on AUD/USD
In anticipation of the Australian Trade Data release, the AUD/USD pair showed positive movement, gaining strength as the US Dollar weakened amidst a protracted US federal government shutdown.
💡 Should the trade data surpass expectations, it could further boost the Australian Dollar. Initial resistance is anticipated around the 100-day Exponential Moving Average (EMA) at 0.6520. The subsequent resistance level is observed at the September 1 high of 0.6560, with further upside potential towards the October 28 high of 0.6590.
📍 On the downside, the October 10 low at 0.6472 may offer some support to buyers. A sustained move lower could lead to a test of the July 31 low of 0.6424. The psychological level at 0.6400 represents a significant contention point.
Australian Dollar FAQs
Key drivers for the Australian Dollar (AUD) include interest rate decisions by the Reserve Bank of Australia (RBA). Given Australia’s resource wealth, the price of iron ore, its primary export, is also a significant factor. The economic health of China, Australia’s largest trading partner, alongside domestic inflation, growth rates, and the trade balance, all influence the AUD. Market sentiment, specifically risk appetite (risk-on favoring AUD), also plays a role.
The RBA influences the Australian Dollar (AUD) through its setting of interest rates. Its primary objective is to maintain inflation within the 2-3% target range by adjusting interest rates. Higher interest rates relative to other major economies tend to support the AUD, while lower rates can weaken it. The RBA’s use of quantitative easing (AUD-negative) and quantitative tightening (AUD-positive) also impacts credit conditions.
As China is Australia’s largest trading partner, its economic health significantly impacts the Australian Dollar (AUD). A robust Chinese economy leads to increased demand for Australian raw materials, goods, and services, thereby boosting the AUD’s value. Conversely, slower Chinese growth can dampen demand for the AUD. Surprises in Chinese economic data often have a direct effect on the Australian Dollar and its currency pairs.
Iron ore, Australia’s largest export, particularly to China, plays a crucial role in influencing the Australian Dollar. Generally, an increase in iron ore prices leads to an appreciation of the AUD due to rising aggregate demand for the currency. A fall in iron ore prices typically has the opposite effect. Higher iron ore prices also tend to correlate with a positive trade balance for Australia, further supporting the AUD.
The Trade Balance, representing the difference between a country’s export earnings and import expenditures, is another influential factor for the Australian Dollar. A strong demand for Australia’s exports creates surplus demand from foreign buyers, increasing the value of the AUD. Conversely, a negative trade balance can weaken the currency. Therefore, a positive net trade balance typically strengthens the AUD.
Final Thoughts
Australia’s latest trade figures indicate a significant improvement in its trade surplus for September, driven by robust export growth. This positive economic sign could offer support to the Australian Dollar in the currency markets.