Forex and commodities: why the AUD is strengthening

Forex and commodities: why the AUD is strengthening

Gold, interest rates, and global growth explain the rise of the Australian dollar against the USD and the euro

In recent weeks, the foreign exchange market has shown a clear move: the Australian dollar (AUD) has been strengthening across the board, both against the US dollar (AUD/USD rising) and against the euro (EUR/AUD falling).

This signal is particularly relevant because it points to intrinsic strength in the AUD, not merely weakness in a single counterpart currency.

The phenomenon should be viewed through a macro-financial and productive lens, where currencies and commodities are becoming increasingly interconnected.

Forex and commodities: a structural relationship

Australia is one of the world’s leading exporters of raw materials, including gold, iron ore, coal, and natural gas. For this reason, the Australian dollar is often described as a commodity currency.

When commodity prices rise:

• the country’s terms of trade improve (that is, the ratio between export and import prices);
• capital flows into the mining sector increase;
• the currency tends to strengthen.

What “the commodity index rising in SDR” means

When it is said that the Australian commodity index has risen in SDR, this means that:

• commodity prices are measured in Special Drawing Rights, a “neutral” unit of account of the International Monetary Fund;
• this method removes the effect of movements in the US dollar.

In practical terms, the increase reflects a real rise in commodity prices, not merely a change driven by exchange rates.

The role of gold

In recent months, gold and the AUD have moved in the same direction for three main reasons:

1. gold benefits from falling real interest rates;
2. Australia is a major gold producer;
3. both tend to react positively to a weaker US dollar.

This correlation is not constant over time, but it tends to strengthen during periods of:

• persistent inflation,
• increased demand for real assets,
• a “risk-on” environment in financial markets.

Monetary policy and interest-rate differentials

Another key factor is the comparison between central banks.

• The Reserve Bank of Australia maintains a cautious stance on rate cuts, supported by still-sensitive inflation.
• The European Central Bank, by contrast, operates in a context of more fragile growth and greater focus on credit conditions.

This creates a yield differential in favor of Australia, making the AUD more attractive even relative to the euro.

Scenario analysis – swing horizon (1–4 weeks)

AUD/USD

Main scenario (constructive)

• support from gold and commodities;
• US dollar under pressure;
• continuation targets toward recent resistance levels.

As long as the exchange rate holds above key support levels, the bias remains bullish.

Alternative scenario (corrective)

• a sudden rebound in the US dollar;
• a decline in gold or a rise in global volatility.

In this case, technical pullbacks are possible, but without a structural trend reversal.

EUR/AUD

Main scenario (bearish)

• relative strength of the AUD;
• euro weighed down by weak growth and a more accommodative monetary stance.

The overall structure favors further declines in the cross.

Alternative scenario (technical rebound)

• recovery of the euro on better macro data;
• profit-taking on the AUD.

Rebounds are possible, but for now they are considered corrective.

In summary

The movement of the Australian dollar is not episodic: it reflects a structural interaction between Forex, commodities, and monetary policy.

The correlation with gold and the behavior of crosses such as EUR/AUD suggest that the market is rewarding Australia as a real, export-driven, and cyclical economy, in a phase of reshaping global balances.

The information contained in this article is for informational purposes only and does not constitute investment solicitation or financial advice. Trading in the Forex market involves significant risk.