Australian Dollar holds losses as US Dollar remains stronger amid Trump tariff threats
- The Australian Dollar lost ground following tariff threats on US imports made by President Trump.
- The AUD faced challenges amid increased risk aversion due to news of growing momentum among Trump’s advisers to implement tariffs.
- Trump stated that he "wants tariffs 'much bigger' than 2.5%," the rate proposed by Treasury Secretary Scott Bessent.
The Australian Dollar (AUD) continues to decline for the second consecutive day against the US Dollar (USD) on Tuesday. The AUD/USD pair's weakness can be linked to tariff threats made by US President Donald Trump.
The risk-sensitive AUD also faced challenges amid increased risk aversion due to news on growing momentum among US President Donald Trump’s advisers to place 25% tariffs on Mexico and Canada as soon as February 1.
President Trump announced plans on Monday evening to impose tariffs on imports of computer chips, pharmaceuticals, steel, aluminum, and copper. The goal is to shift production to the United States (US) and bolster domestic manufacturing.
Trump also commented on the popular social media app TikTok, stating, “We will have a lot of people bidding on TikTok.” He emphasized his stance on limiting China’s involvement, saying, “Don’t want China involved in TikTok.”
Australian Dollar declines due to increased risk aversion regarding Trump’s policies
- The US Dollar Index (DXY), which tracks the value of the US Dollar against six major currencies, trades near 108.00 at the time of writing. Traders will likely watch the US Durable Goods Orders, the Conference Board’s Consumer Confidence, and the Richmond Fed Manufacturing Index later on Tuesday.
- Scott Bessent, the Treasury Secretary under Trump, stated that he aims to introduce new universal tariffs on US imports, starting at 2.5%. These tariffs could rise to as much as 20%, reflecting Trump’s aggressive stance on trade policies, consistent with his campaign rhetoric last year.
- Speaking with reporters aboard Air Force One early Tuesday, US President Donald Trump stated that he “wants tariffs ‘much bigger’ than 2.5%,” as proposed by Treasury Secretary Scott Bessent. However, Trump noted that he has not yet decided on the specific tariff levels.
- The USD gained strength amid uncertainty regarding the impact of US President Donald Trump's trade and immigration policies. This backdrop may encourage the Federal Reserve (Fed) to maintain a cautious stance on cutting interest rates this year.
- According to S&P Global data released on Friday, the US Composite PMI fell to 52.4 in January from 55.4 in December. The Manufacturing PMI rose to 50.1 in January, surpassing the previous reading of 49.4 and exceeding the forecast of 49.6. However, the Services PMI dropped to 52.8 in January from 56.8 in December, falling short of the expected 56.5.
- However, Trump said on Thursday that he wants the Fed to cut interest rates immediately. "With oil prices going down, I'll demand that interest rates drop immediately, and likewise they should be dropping all over the world," said Trump at the World Economic Forum in Davos, Switzerland.
- The US Dollar faced challenges as Trump's remarks came before the Federal Reserve's (Fed) monetary policy meeting scheduled for January 28 and 29, with expectations the US central bank will hold rates steady.
- Traders expect the 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 one more rate cut.
- China's NBS Manufacturing PMI fell to 49.1 in January, down from 50.1 in December, missing the market expectation of 50.1. Similarly, the NBS Non-Manufacturing PMI declined to 50.2 in January compared to December's 52.2 reading. As close trade partners, China's economic performance significantly impacts the Australian economy.
- The Australian Dollar also failed to gain support from China’s fresh stimulus measures to promote its development of index investment products, its latest effort to revive the ailing equity market. The China Securities Regulatory Commission (CSRC) has approved a second round of long-term stock investment pilot programs valued at 52 billion Yuan ($7.25 billion).
- China’s Industrial Profits declined by 3.3% year-over-year to CNY 7,431.05 billion in 2024, easing from the 4.7% drop recorded in the first 11 months of the year. This marks the third consecutive year of contraction, following a 2.3% decline in 2023. The continued downturn reflects ongoing economic challenges, including weak demand, rising deflationary pressures, and a prolonged slump in the property sector.
Technical Analysis: Australian Dollar tests 14-day EMA near 0.6250
The AUD/USD pair trades near 0.6260 on Tuesday, confined within an ascending channel on the daily chart, hinting at a potential bullish bias. The 14-day Relative Strength Index (RSI) is positioned on the 50 mark, suggesting a neutral market sentiment.
The AUD/USD pair tests immediate support at the 14-day Exponential Moving Average (EMA) of 0.6256. Additional support lies near the channel's lower boundary around 0.6250.
Regarding resistance, the AUD/USD pair could test the nine-day EMA at 0.6266, followed by the key psychological level of 0.6300. A break above the latter could reinforce the bullish bias and lead the pair to target the channel's upper boundary around 0.6360.
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 weakest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.51% | 0.34% | 0.62% | 0.12% | 0.45% | 0.47% | 0.37% | |
| EUR | -0.51% | -0.18% | 0.10% | -0.39% | -0.07% | -0.05% | -0.15% | |
| GBP | -0.34% | 0.18% | 0.31% | -0.21% | 0.08% | 0.12% | 0.03% | |
| JPY | -0.62% | -0.10% | -0.31% | -0.52% | -0.20% | -0.20% | -0.28% | |
| CAD | -0.12% | 0.39% | 0.21% | 0.52% | 0.33% | 0.34% | 0.24% | |
| AUD | -0.45% | 0.07% | -0.08% | 0.20% | -0.33% | 0.01% | -0.08% | |
| NZD | -0.47% | 0.05% | -0.12% | 0.20% | -0.34% | -0.01% | -0.10% | |
| CHF | -0.37% | 0.15% | -0.03% | 0.28% | -0.24% | 0.08% | 0.10% |
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.
Forex News
Keep up with the financial markets, know what's happening and what is affecting the markets with our latest market updates. Analyze market movers, trends and build your trading strategies accordingly.
