- The Australian Dollar declined as Trump reiterated his plan to implement an additional 10% tariff on Chinese imports.
- On February 4, US President Trump imposed new tariffs on Chinese goods, raising the total levy to 20%.
- The US GDP Annualized expanded by 2.3% in Q4 2024, aligning with market expectations.
The Australian Dollar (AUD) remains under pressure for the sixth consecutive day on Friday, with the AUD/USD pair extending its losing streak. This decline follows US President Donald Trump’s confirmation that his proposed 25% tariffs on Mexican and Canadian goods will take effect on March 4, alongside an additional 10% duty on Chinese imports. Trump cited ongoing concerns over drug trafficking into the US as justification. Investors now await the release of the Personal Consumption Expenditures Price Index (PCE), the Federal Reserve’s preferred inflation measure, due later in the day.
Further weighing on the AUD, President Trump has imposed additional tariffs on Chinese goods, increasing the levy to 20% following the initial 10% implementation on February 4. Given China’s status as Australia’s key trading partner, any renewed US tariff threats could put further downward pressure on the China-linked AUD.
Adding to the headwinds, Australia’s Private Capital Expenditure data, released on Thursday, unexpectedly contracted by 0.2% quarter-on-quarter in Q4 2024, falling short of market expectations of 0.8% growth. This follows an upwardly revised 1.6% expansion in the previous quarter.
Meanwhile, Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser stated on Thursday that while further progress on inflation is expected, more tangible evidence is needed. He also emphasized that Australia’s tight labor market remains a key challenge in controlling inflation.
Australian Dollar Weakens Amid Risk-Off Sentiment
- The US Dollar Index (DXY), which tracks the USD against six major currencies, strengthened following Thursday's release of US Gross Domestic Product (GDP) data for Q4 2024. At the time of writing, the DXY has risen above 107.00.
- US GDP grew by 2.3% in the fourth quarter, aligning with both initial estimates and market expectations.
- In comments made late Wednesday, Federal Reserve Bank of Atlanta President Raphael Bostic suggested that the Fed should maintain current interest rates to sustain downward pressure on inflation, according to Bloomberg.
- US Commerce Secretary Howard Lutnick stated that April 3 would serve as the baseline for reciprocal tariff data and reiterated that he would not allow Chinese vehicles into the US, citing national security concerns. Meanwhile, US Treasury Secretary Scott Bessent reaffirmed his commitment to making President Trump’s tax cuts permanent.
- The White House also announced late Wednesday that President Trump issued an executive order directing the Department of Government Efficiency (DOGE) to implement cost-cutting measures. This includes justifying expenditures, limiting travel, and identifying surplus federal properties for sale.
- Additionally, on Friday, Trump signed a memorandum instructing the Committee on Foreign Investment in the United States (CFIUS) to restrict Chinese investments in strategic sectors. A White House official, cited by Reuters, stated that the move aims to encourage foreign investment while safeguarding US national security interests.
- In China, the People’s Bank of China (PBOC) injected CNY300 billion via the one-year Medium-term Lending Facility (MLF) on Tuesday, maintaining the rate at 2%. Additionally, the PBOC conducted CNY318.5 billion in seven-day reverse repos at 1.50%, consistent with the prior rate.
- According to the Commonwealth Bank of Australia (CBA), as reported by The Wall Street Journal, Trump’s escalating trade war rhetoric is a growing concern, and China’s response will be crucial in shaping the AUD’s future performance.
- On Thursday, PBOC Deputy Governor Lu Lei proposed that the central bank should actively support fundraising efforts, including issuing special treasury bonds, to help major state-owned banks strengthen their Common Equity Tier 1 (CET1) capital. Given Australia’s close trade ties with China, any developments in the Chinese economy could impact the AUD.
- Meanwhile, the RBA recently lowered its Official Cash Rate (OCR) by 25 basis points to 4.10%, marking the first rate cut in four years. RBA Governor Michele Bullock acknowledged the effects of high interest rates but warned that it is too soon to declare victory over inflation. She also highlighted labor market strength and clarified that future rate cuts are not guaranteed despite market expectations.
AUD/USD Could Test 0.6200 as Bearish Bias Strengthens
AUD/USD trades around 0.6220 on Friday. Technical analysis indicates that the pair remains below the nine- and 14-day Exponential Moving Averages (EMAs), signaling weakening short-term price momentum. The 14-day Relative Strength Index (RSI) remains below 50, reinforcing a bearish outlook.
The pair is currently testing immediate support at the key psychological level of 0.6200. A decisive break below this level could push AUD/USD toward 0.6087, marking its lowest level since April 2020, recorded on February 3.
On the upside, immediate resistance is found at the nine-day EMA of 0.6297, followed by the 14-day EMA at 0.6302. A breakout above these levels could strengthen short-term price momentum, potentially allowing the pair to challenge the two-month high of 0.6408, reached on February 21.
AUD/USD: Daily Chart
