Australian Dollar strengthens to near 0.6950 following Fed Warsh’s speech

AUD/USD edges higher to around 0.6945 in Friday’s early European session.
Fed Chair Warsh says he won’t preview how it will adjust policy at its final two meetings this year.
Pricing in financial markets showed the odds of a RBA rate hike in the November meeting dropped to below 20%.

The AUD/USD pair gains ground to near 0.6945 during the early European trading hours on Friday. The US Dollar (USD) attracts some sellers against the Australian Dollar (AUD) following a speech from Federal Reserve (Fed) Chair Kevin Warsh.

Análisis de TMGM: noticias de mercados financieros, calendario económico e información del mercado

Fed Chair spoke at the International Monetary Fund (IMF) event on Friday, saying that he will assess the situation at the October and December policy meetings.

“We removed a dose of accommodation about a month ago,” said Warsh. “I don’t prejudge meetings. I don’t believe in saying now what I might do at the meetings that we have in the balance of this year,” he added.

On the Aussie front, financial markets trimmed the probability of a Reserve Bank of Australia (RBA) interest rate rise on November 3 to below 20% following the latest Australian jobs data, down from about 35% before the data, according to Bloomberg.

Unemployment has reached 4.7%, its highest rate in nearly five years, while the total number of employed Australians dropped by 39,300 jobs in September, the Australian Bureau of Statistics data showed earlier this week.

Australia jobs stumble as RBA annual report looms

Analysts at Rabobank highlight that “today the sun rises with Australian labour data for September,” showing the unemployment rate “printing at 4.7% and a contraction of almost 40 thousand jobs, erasing the job gains seen in July.” Against this softer backdrop, Rabobank notes that “the RBA will also be releasing its annual report later today,” which will be closely watched for any policy signals.

Warsh flags investment surge and AI risks as Fed keeps options open into year-end

Fed Chair Warsh’s speech scores 5.6/10 on the FXS Speechtracker, modestly below the 6.1/10 established baseline, pointing to a slightly less impactful but still broadly consistent tone. The admission of being “over-scarred from the global financial crisis” underscores a cautious bias even as Warsh highlights structural growth and an investment surge driven by “good policies,” suggesting a preference to wait for “crystalizing” data on output, employment, and inflation at the October and December meetings. Warsh’s focus on AI as a demand-side force and on tail-risk management reinforces a risk-aware stance that tempers any hawkish implications from the investment boom.

The FXS Fed Sentiment Index was unchanged, moving 0.00 points to a level of 127.51, which keeps the overall policy tone firmly in hawkish territory despite the slightly softer FXS Speechtracker score. The stable, elevated index level indicates that markets still interpret Warsh’s emphasis on price stability, investment strength, and upcoming data-dependent meetings as consistent with a bias toward tighter policy rather than a shift toward the Dollar-dampening dovish side.

Technical Analysis: AUD/USD retains a negative tone below the 100-day SMA

In the daily chart, AUD/USD keeps a bearish near-term bias as spot holds beneath a dense band of overhead levels. Price stays below the 20-period Bollinger middle band and the 100-day simple moving average (SMA), suggesting rallies remain capped while the pair consolidates in the lower half of the recent range. The Relative Strength Index (14) slips around 39, hinting at persistent but not extreme downside pressure after the latest decline.

On the topside, initial resistance is aligned with the 20-period Bollinger lower band around 0.6885, followed by the Bollinger middle band at 0.6990, where selling interest could re-emerge. Above that, the 100-day SMA at 0.7040 and the upper Bollinger band near 0.7095 form a broader supply zone that would need to be overcome to ease the current bearish tone and open the way for a more sustained recovery.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Australian Dollar FAQs

What key factors drive the Australian Dollar?

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.

How do the decisions of the Reserve Bank of Australia impact 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 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.

How does the health of the Chinese Economy impact the Australian Dollar?

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.

How does the price of Iron Ore impact the Australian Dollar?

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.

How does the Trade Balance impact the Australian Dollar?

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.

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