AUD: Tailwinds to stay despite Budget impact AUD: Tailwinds to stay despite Budget impact AUD: Tailwinds to stay despite Budget impact

AUD: Tailwinds to stay despite Budget impact

Forex 3 minutes to read
Charu Chanana

Head of FX Strategy

Key points:

  • Australia’s federal budget announcement due today is expected to ease household pressure without driving inflation higher.
  • The budget is unlikely to impact the RBA rate path, with the central bank remaining a laggard in the G10 easing cycle.
  • AUD is also focused on China's stimulus announcements, Biden administration’s potential tariffs on China, and US inflation data.
  • Despite these factors, AUDUSD could remain supported on dips.


It’s a busy week for AUD traders. First up is the Australian government’s presentation of the 2024-25 Budget on May 14 at 0930 GMT. On Sunday, Treasurer Jim Chalmers stated that the new Budget would ease household pressure without driving inflation higher. Treasury predictions in the budget show inflation dropping to 2.75% by December, which means inflation will be back in the 2-3% RBA target range. This is quite dovish compared to RBA’s outlook of CPI to remain at 3.8% until December before falling to 3.2% in June 2025 and 2.8% in December 2025. Hence, the budget announcement is likely to underscore the case of no more rate hikes from the RBA, and could even leave the door open to price in rate cuts for this year if inflation surprises to the downside.

The budget announcement will also underscore that Australia’s fiscal position is comparatively better than many other DM economies. Figures from Treasury showed the government is expected to post a surplus of A$9.3 billion ($6.14 billion) for the fiscal year to June 2024, after a A$22.1 surplus last year, marking the first back-to-back budget surplus in nearly two decades. This will allow for some tax and spending measures targeted towards easing the cost-of-living pressures, however inflation remains top of mind for Australian administration, and spending is likely to be targeted to key strategic sectors such as defense, infrastructure, critical minerals, green energy, housing and education.

Overall, the budget announcement is likely to be neutral-to-negative for AUD in the short run, while it could fuel bullish bets on AUD in the medium-to-long term. RBA’s rate path is unlikely to be altered by the budget announcement, and it could still well be the last of the G10 central banks to cut rates.

However, there are several other factors beyond the budget that can influence volatility in AUD over the course of this week. This includes:

  1. Potential tariffs announcements from the Biden administration on China’s strategic sectors such as EVs: AUD negative
  2. Further stimulus measures from China to support the economy: AUD positive
  3. US inflation readings, from PPI today to CPI tomorrow. There are increasing risks of hard data slowing down in the US, and the Fed has shown inclination to stay away from rate hikes. If core CPI comes in softer as well, that can prompt a bearish turn for the US dollar: AUD positive

Overall, this means AUDUSD could be supported on dips. Plenty of supports also on the downside with 23.6% fibo retracement at 0.6580, 100DMA at 0.6571 and 200DMA at 0.6523. AUD upside could also be more evident on crosses, especially against currencies where there may be scope for dovish repricing of central bank paths or currencies that can continue to be a funding currency to fuel carry trades in low vol environment. This could mean CAD, GBP or CHF.

Source: Bloomberg

Appendix: Here are the top priorities for Australia's upcoming federal budget announcement, from what ChatGPT tells me:

  • Cost-of-Living Relief: One of the major expectations is the continuation of measures to alleviate cost-of-living pressures. This includes extending energy bill relief and targeted support for families and small businesses. For instance, eligible families might receive up to A$500 off their power bills, while small businesses could get up to A$650.
  • Tax Reforms: The implementation of the Stage 3 income tax cuts, set to take effect on July 1, 2024, is confirmed. These cuts will adjust the tax rates and thresholds, offering reductions for all taxpayers. There is also talk of further modest but meaningful tax reforms to incentivize business investment and support economic growth.
  • Green Energy Transition: Significant investments in renewable energy and green technologies are anticipated. The budget is likely to include funding for critical minerals, renewable hydrogen, and battery manufacturing to support Australia's net-zero emissions targets.
  • Defense and Infrastructure Spending: Increased defense spending and substantial investments in infrastructure projects, particularly in Western Sydney, are expected. This includes a A$50.3 billion boost for the military and A$1.9 billion for road upgrades and other infrastructure.
  • Support for Vulnerable Groups: Enhanced support for people fleeing domestic violence, including financial aid and housing support, is planned. Additional measures to improve safety and provide resources for those affected by domestic violence will be included in the budget.
  • Economic Stimulus and Workforce Development: The budget aims to stimulate economic growth through targeted tax incentives and investment in workforce development. This includes funding for fee-free TAFE and vocational education places to address skill shortages and improve productivity.


Other recent Macro/FX articles:

14 May: Global Market Quick Take - Asia
14 May: US inflation report: How to trade the event
13 May: Weekly FX Chartbook: US CPI and US-China trade tensions on the radar
8 May: Bank of England preview: Rate cuts in mind, but patience required
7 May: AUD: RBA fails to meet the hawkish expectations
3 May: JPY: Staying on intervention alert
2 May: Fed Decision: High-for-longer, not higher-for-longer
30 Apr: AUD: Retail sales miss questions RBA market pricing
30 Apr: FOMC rate decision: How to trade the event
29 Apr: Weekly FX Chartbook: Fed’s hawkishness meets BOJ’s dovishness
29 Apr: Macro Podcast: Japanese drama - what's next for the yen?
26 Apr: JPY: Bank of Japan adds to reasons to stay bearish yen
25 Apr: JPY: Accelerated sell-off; can the BOJ halt yen's decline?
25 Apr: Thematic Podcast: Deciphering Asian forex interventions
23 Apr: GBP: What can drive the next leg lower?
22 Apr: Weekly FX Chartbook: Stretched USD strength is raising intervention alert
19 Apr: FX 101: Using FX for portfolio diversification
18 Apr: JPY: Intervention alert, or a BOJ alert?
16 Apr: Chinese Yuan’s Double Whammy - Dollar Strength and Yen Weakness
12 Apr: Riding the Fed-ECB Policy Divergence
11 Apr: ECB rate decision: How to trade the event
9 Apr: CAD vulnerable as market underprices dovish Bank of Canada risks
9 Apr: US inflation report: How to trade the event
8 Apr: Macro and FX Podcast: NFP, CPI, ECB and Japan
3 Apr: Chinese yuan bears are undeterred by PBoC’s grip
3 Apr: FX Quarterly Outlook: The rate cut race shifts into high gear
8 Feb: FX 101: USD Smile and portfolio impacts from King Dolla



Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (
- Analysis Disclaimer (
- Notification on Non-Independent Investment Research (

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000

Contact Saxo

Select region


The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.