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Aussie Dollar Outlook: China’s Response Key to AUD/USD
Shifting to AUD/USD, price action hinges on China’s response to US tariffs and blacklistings, along with Beijing’s policy rollouts. China accounts for one-third of Aussie exports, influencing the Australian economy, the RBA rate path, and the Aussie dollar.
An escalation in the global trade war could pressure the Aussie dollar, given Australia’s trade-to-GDP ratio exceeds 50%. However, robust demand from China could alleviate the pressures of sweeping US tariffs, underscoring the potential effects of Beijing’s stimulus maneuvers on domestic consumption.
In February, RBA Governor Michele Bullock commented on global trade and tariffs, stating:
“Global trade uncertainties and tariff threats remain unpredictable, with economic impacts dependent on implementation and market reactions.”
Australian Dollar Daily Outlook: US Inflation in the Spotlight
In the US session, US inflation figures will impact the US-Aussie interest rate differential.
A higher-than-expected inflation reading could lower bets on a June Fed rate cut. A more hawkish Fed policy stance would widen the rate differential in favor of the US dollar. In this scenario, the AUD/USD pair could drop below $0.62500.
However, a softer inflation print may cement bets on a June Fed rate cut. A narrowing in the interest rate differential could drive the pair above the 50-day EMA toward the $0.63623 resistance level.
Personal income and spending data will also offer clues on inflation trends. Stronger personal income and consumption may fuel demand-driven inflation and support a hawkish Fed pivot.
Additionally, President Trump’s tariff policies need consideration. Higher tariffs could impact risk sentiment, weighing on commodity currencies like the Aussie Dollar.
