Australian Dollar steadies as Trump’s revised tariffs on China are smaller than expected
- The Australian Dollar strengthened as President Trump’s revised tariffs on China turned out to be significantly smaller than initially anticipated.
- Trump announced plans to impose a 10% tariff on Chinese imports beginning February 1.
- The S&P/ASX 200 Index declined, driven by a drop in mining stocks as weaker commodity prices put pressure on the sector.
The Australian Dollar (AUD) remains steady against the US Dollar (USD) on Thursday, as market concerns eased following news that the China-specific tariffs proposed under US President Donald Trump’s revised plan are significantly smaller than initially expected. This development helped calm investors’ nerves, especially given the strong trade ties between China and Australia, which make Australian markets sensitive to changes in China’s economic landscape.
President Trump announced plans to implement a 10% tariff on Chinese imports starting February 1, citing concerns over fentanyl shipments from China to Mexico and Canada, according to Reuters. In response, Chinese Vice Premier Ding Xuexiang warned on Tuesday about the potential trade war fallout, stating that “there are no winners” in such conflicts. His remarks come as China braces for possible tariffs under the Trump administration, as reported by CNBC.
The S&P/ASX 200 Index fell to near 8,400 on Thursday, driven primarily by a decline in mining stocks as weaker commodity prices weighed on the sector. This downturn occurred despite strong gains on Wall Street. Investors remain cautious as they assess the implications of President Trump’s policy changes.
Australian Dollar appreciates as market concerns ease regarding Trump tariffs
- The US Dollar Index (DXY), which tracks the performance of the US Dollar against six major currencies, maintains its position above 108.00 at the time of writing. The Greenback received support as President Donald Trump issued a memorandum instructing federal agencies to investigate and address ongoing trade deficits.
- Traders will likely monitor Friday’s release of the preliminary US S&P Global Purchasing Managers Index (PMI) and the Michigan Consumer Sentiment Index for January. These indicators are likely to provide valuable insights into near-term economic trends.
- The US Dollar could appreciate as traders expect the US Federal Reserve (Fed) to keep its benchmark overnight rate steady in the 4.25%-4.50% range at its January meeting. Moreover, Trump’s policies could drive inflationary pressures, potentially limiting the Fed to just one more rate cut.
- US Retail Sales rose by 0.4% MoM in December, reaching $729.2 billion. This reading was weaker than the market expectations of a 0.6% rise and lower than the previous reading of a 0.8% increase (revised from 0.7%).
- The US Consumer Price Index increased by 2.9% year-over-year in December, up from 2.7% in November, aligning with market expectations. Monthly, CPI rose 0.4%, following a 0.3% increase in the previous month. US Core CPI, which excludes volatile food and energy prices, rose 3.2% annually in December, slightly below November’s figure and analysts’ forecasts of 3.3%.
- Traders are increasingly expecting the Reserve Bank of Australia (RBA) to start cutting interest rates as soon as next month. This outlook is fueled by weaker core inflation data, which has fallen to its lowest level since Q4 2021, nearing the RBA’s target range of 2% to 3%. All eyes are now on Australia’s upcoming quarterly inflation report, set for release next week, as it could offer additional clues about the future direction of interest rates.
Technical Analysis: Australian Dollar remains below 0.6300, ascending channel’s upper boundary
The AUD/USD pair trades near 0.6270 on Thursday, with a daily chart analysis indicating movement within an ascending channel pattern, suggesting a potential bullish bias. Additionally, the 14-day Relative Strength Index (RSI) is slightly above 50, reinforcing positive market sentiment.
On the upside, the AUD/USD pair could test the psychological resistance level at 0.6300, with the next target near the upper boundary of the ascending channel around 0.6320.
The initial support appears at the nine-day Exponential Moving Average (EMA) at 0.6244, followed by the 14-day EMA at 0.6238. Stronger support is seen at the ascending channel’s lower boundary around 0.6220, with further support at the psychological level of 0.6200.
AUD/USD: Daily Chart
Australian Dollar PRICE Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Euro.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.06% | 0.03% | -0.02% | 0.03% | -0.03% | -0.00% | -0.05% | |
| EUR | -0.06% | -0.03% | -0.08% | -0.03% | -0.09% | -0.06% | -0.11% | |
| GBP | -0.03% | 0.03% | -0.06% | 0.00% | -0.06% | -0.02% | -0.08% | |
| JPY | 0.02% | 0.08% | 0.06% | 0.06% | 0.01% | -0.01% | -0.02% | |
| CAD | -0.03% | 0.03% | -0.00% | -0.06% | -0.05% | -0.03% | -0.08% | |
| AUD | 0.03% | 0.09% | 0.06% | -0.01% | 0.05% | 0.04% | -0.01% | |
| NZD | 0.00% | 0.06% | 0.02% | 0.00% | 0.03% | -0.04% | -0.05% | |
| CHF | 0.05% | 0.11% | 0.08% | 0.02% | 0.08% | 0.00% | 0.05% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
Australian Dollar FAQs
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.
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.
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.
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.
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.