- The Australian Dollar weakens amid rising global trade tensions ahead of possible US tariffs.
- A Reuters poll indicates the Reserve Bank of Australia (RBA) is likely to hold rates steady in April.
- The US GDP Annualized expanded by 2.4% in Q4 2024, surpassing the 2.3% estimate.
The Australian Dollar (AUD) weakens against the US Dollar (USD) on Friday, erasing previous session gains amid heightened risk aversion driven by concerns over impending US auto tariffs.
US President Donald Trump signed an order on Wednesday imposing a 25% tariff on auto imports, further escalating global trade tensions. These aggressive trade measures are expected to strain relations with key trading partners ahead of reciprocal tariffs set for April 2.
A Reuters poll indicates the Reserve Bank of Australia (RBA) will maintain rates at 4.10% in April, with all 39 surveyed economists in agreement. However, the median forecast anticipates two rate cuts in 2025, with 25 basis point reductions in May and September, bringing rates down to 3.60% by Q3. The RBA is expected to ease rates gradually due to persistent core inflation at 3.2%, low unemployment, and recovering economic growth. Approximately 75% of economists believe a rate cut in May hinges on Q1 inflation data.
Westpac economists describe the RBA’s April 1 policy meeting as a "dead rubber" in the broader monetary context but maintain expectations for a rate cut in May.
On the political front, Australian Prime Minister Anthony Albanese announced on Friday that a national election will be held on May 3. The five-week campaign is expected to focus on cost-of-living concerns, with recent polls indicating a tight race between the Labor Party and the opposition Liberal-National coalition.
Australian Dollar Struggles as US Dollar Steadies Amid Risk Aversion
- The US Dollar Index (DXY) hovers around 104.30, supported by lower US Treasury yields, with the 2-year yield at 3.99% and the 10-year yield at 4.35%.
- US Gross Domestic Product (GDP) Annualized grew by 2.4% in Q4 2024, surpassing the 2.3% forecast. Investors now await the US Personal Consumption Expenditures (PCE) Price Index, due for release later on Friday.
- Moody’s has warned that increased tariffs and tax cuts could significantly widen government deficits, potentially leading to a US debt rating downgrade and rising Treasury yields. S&P Global cautioned that US policy uncertainty could dampen global economic growth, while Fitch Ratings highlighted the severe impact of tariffs on smaller economies such as Brazil, India, and Vietnam.
- Federal Reserve (Fed) policymakers remain divided on monetary policy amid trade uncertainty. Boston Fed President Susan Collins suggested the Fed faces a difficult choice between maintaining a restrictive stance or acting preemptively to counter economic deterioration. Richmond Fed President Thomas Barkin emphasized a cautious approach, while St. Louis Fed President Alberto Musalem warned that Trump’s tariff policies are increasing economic uncertainty and inflation.
- President Trump announced plans to reduce tariffs on China to facilitate ByteDance’s sale of TikTok’s US operations. While he emphasized the overall value of tariffs, he suggested a minor reduction could aid in finalizing the deal. Additionally, Trump hinted at another extension for the TikTok sale deadline.
- Trump also signaled plans to impose tariffs on copper imports, initially expected by November 2025, within weeks. This development provided some support for the AUD, as Australia is a key copper exporter.
- Australian Treasurer Jim Chalmers unveiled the 2025/26 budget on Tuesday, including tax cuts totaling A$17.1 billion. The budget projects a deficit of A$27.6 billion for 2024-25 and A$42.1 billion for 2025-26, with GDP growth forecasted at 2.25% in 2026 and 2.5% in 2027.
AUD/USD Holds Near 0.6300 Amid Technical Resistance
AUD/USD hovers near 0.6290 on Friday, with technical indicators signaling a potential bullish shift as the pair challenges its descending channel pattern. However, the 14-day Relative Strength Index (RSI) remains below 50, suggesting persistent bearish pressure.
Immediate resistance lies at the nine-day Exponential Moving Average (EMA) at 0.6304. A breakout above this level could strengthen short-term momentum, opening the door for a test of the monthly high at 0.6391, followed by a three-month high at 0.6408.
On the downside, failure to hold gains may push AUD/USD back into its descending channel, reinforcing a bearish outlook. In this scenario, the pair could drop toward the seven-week low of 0.6187, recorded on March 5, followed by the channel’s lower boundary at 0.6170.
AUD/USD: Daily Chart Analysis
