- 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 effective 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 decline in the Australian equity market 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 and 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% | 0.04% | -0.02% | 0.02% | 0.04% | -0.02% | -0.02% | |
| EUR | -0.06% | -0.01% | -0.08% | -0.04% | -0.02% | -0.07% | -0.08% | |
| GBP | -0.04% | 0.01% | -0.08% | -0.02% | -0.00% | -0.05% | -0.07% | |
| JPY | 0.02% | 0.08% | 0.08% | 0.04% | 0.07% | -0.03% | -0.00% | |
| CAD | -0.02% | 0.04% | 0.02% | -0.04% | 0.03% | -0.03% | -0.04% | |
| AUD | -0.04% | 0.02% | 0.00% | -0.07% | -0.03% | -0.05% | -0.06% | |
| NZD | 0.02% | 0.07% | 0.05% | 0.03% | 0.03% | 0.05% | -0.01% | |
| CHF | 0.02% | 0.08% | 0.07% | 0.00% | 0.04% | 0.06% | 0.01% |
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).
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
