- The Australian Dollar recovers its daily losses as the US Dollar edges lower.
- The Australian Dollar faces challenges amid the increased likelihood of the RBA rate cut in February.
- Traders await US Personal Consumption Expenditures (PCE) data later on Friday.
The Australian Dollar (AUD) attempts to halt its losing streak against the US Dollar (USD) on Friday. However, the AUD/USD pair depreciated due to renewed tariff threats from US President Donald Trump against China. Investors await more clarity from Trump’s tariff policies.
President Trump reiterated his plan on Thursday to impose 25% tariffs on Canada and Mexico but did not specify a timeline for China. However, Trump stated that China would also face tariffs, with his administration actively working on their implementation. Given China’s significant trade relationship with Australia, any indication of a renewed US-China trade war could put downward pressure on the AUD.
Trump also announced his threat on X (formerly Twitter) to levy 100% tariffs on BRICS nations if they attempt to introduce an alternative currency to challenge the US dollar in international trade.
The Aussie Dollar struggles as ANZ, CBA, Westpac, and now National Australia Bank (NAB) all anticipate a 25 basis point (bps) rate cut from the Reserve Bank of Australia (RBA) in February. Previously, the NAB had forecasted a rate cut in May but has now moved its projection forward to the February RBA meeting.
Easing inflationary pressures toward the end of 2024 have fueled speculation that the Reserve Bank of Australia could consider a rate cut in February. The RBA has maintained the Official Cash Rate (OCR) at 4.35% since November 2023, emphasizing that inflation must “sustainably” return to its 2%-3% target range before any policy easing.
Australian Dollar depreciates due to increased hawkish tone surrounding Fed
- The US Dollar Index (DXY), which measures the US Dollar’s value against six major currencies, trades above 108.00 at the time of writing. The US Personal Consumption Expenditures (PCE), Personal Income/Spending, and the Chicago Purchasing Managers’ Index (PMI) will be in focus, which is due later on Friday.
- The Department of Commerce reported that Gross Domestic Product Annualized (Q4) fell to 2.3% from 3.1%, missing expectations of 2.6%. Additionally, Initial Jobless Claims for the week ending January 24 came in at 207K, below forecasts of 220K but an improvement from the previous week’s 223K.
- The US Federal Reserve held its overnight borrowing rate steady in the 4.25%-4.50% range at its January meeting on Wednesday, as widely expected. This decision followed three consecutive rate cuts since September 2024, totaling a full percentage point.
- The US Dollar strengthened after the Fed adopted a cautious tone. During the press conference, Fed Chair Jerome Powell emphasized that the central bank would need to see “real progress on inflation or some weakness in the labor market” before considering any further adjustments to monetary policy.
- 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 Treasury Secretary Scott Bessent proposed. However, Trump has not yet decided on the specific tariff levels.
- The Reserve Bank of Australia released its January 2025 Bulletin, featuring a detailed analysis of how monetary policy changes influence interest rates in the economy and how fluctuations in interest rates impact economic activity and inflation.
- Australia’s CPI rose by 0.2% quarter-on-quarter in the fourth quarter of 2024, matching the growth seen in the previous quarter but falling short of the market expectation of 0.3%. On an annual basis, CPI inflation eased to 2.4% in Q4 from 2.8% in Q3, also below the consensus forecast of 2.5%.
- Australia’s Monthly CPI for December 2024 increased by 2.5% year-over-year, in line with forecasts and up from November’s 2.3%. This marked the highest reading since August but remained within the Reserve Bank of Australia’s (RBA) target range of 2% to 3% for the fourth consecutive month. The RBA’s Trimmed Mean CPI rose by 3.2% YoY, the slowest pace in three years, slightly under the expected 3.3% but still above the central bank’s target range.
- Australian Treasurer Jim Chalmers stated on Wednesday that “the worst of the inflation challenge is well and truly behind us.” Chalmers further emphasized that “the soft landing we have been planning and preparing for is looking more and more likely,” according to Reuters.
- The AUD also faced challenges amid increased risk aversion due to tariff threats made by US President Donald Trump. 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.
Technical Analysis: Australian Dollar falls toward 0.6200 within descending channel
The AUD/USD pair hovers around 0.6210 on Friday, trading within the descending channel pattern on the daily chart, indicating a bearish bias. The 14-day Relative Strength Index (RSI) remains below the 50 mark, further confirming the downside momentum.
The AUD/USD pair could target the descending channel’s lower boundary at 0.6170 level, followed by 0.6131—the lowest level since April 2020—recorded on January 13.
On the upside, immediate resistance is seen at the nine-day Exponential Moving Average (EMA) at 0.6240, aligned with the descending channel’s upper boundary.
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 | 0.19% | 0.11% | -0.06% | -0.03% | -0.03% | -0.05% | 0.05% | |
| EUR | -0.19% | -0.08% | -0.24% | -0.20% | -0.22% | -0.24% | -0.14% | |
| GBP | -0.11% | 0.08% | -0.19% | -0.13% | -0.15% | -0.16% | -0.06% | |
| JPY | 0.06% | 0.24% | 0.19% | 0.03% | 0.04% | 0.00% | 0.11% | |
| CAD | 0.03% | 0.20% | 0.13% | -0.03% | -0.01% | -0.03% | 0.07% | |
| AUD | 0.03% | 0.22% | 0.15% | -0.04% | 0.01% | -0.02% | 0.08% | |
| NZD | 0.05% | 0.24% | 0.16% | -0.00% | 0.03% | 0.02% | 0.10% | |
| CHF | -0.05% | 0.14% | 0.06% | -0.11% | -0.07% | -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).
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
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