AUD/USD: People’s Bank of China to Drive Market Moves
In the case of the Australian dollar, AUD/USD trends could hinge on the People’s Bank of China’s (PBoC) next moves. On Monday, January 20, the PBoC will announce the one-year and five-year Loan Prime Rates (LPR). Economists predict the PBoC will leave the one-year and five-year LPRs at 3.1% and 3.6%, respectively.
However, an unexpected cut to the LPRs could drive demand for credit, potentially boosting consumption. A pickup in consumption may trigger Aussie dollar appetite. China accounts for one-third of Australian exports, a key contributor to Australia’s economy, which has a trade-to-GDP ratio above 50%.
China’s demand environment may also influence the RBA rate path. In December, RBA Governor Michele Bullock commented on China’s significance, stating,
“US moves against China could affect Aussie trade terms with China, potentially impacting the Aussie economy.”
For a comprehensive analysis of AUD/USD trends and trade data insights, visit our detailed reports here.
Australian Dollar Daily Chart
In the US session, Trump’s inauguration could affect market risk sentiment. Aggressive US tariffs on China may fuel safe-haven demand, potentially dragging the AUD/USD pair toward the crucial $0.61 level. Conversely, a softer stance on China may fuel risk appetite, driving the pair to the upper trend line of the descending channel.
On Friday, January 20, the IMF revised up its 2025 growth forecasts for the US, aligning with expectations of a more hawkish Fed rate path. FOMC member support for fewer rate cuts could also pressure the AUD/USD pair, potentially bringing sub-$0.61 levels into play. Trump’s stance on import duties may affect the Fed’s policy stance. Punitive US tariffs could raise import prices, potentially fueling inflationary pressures.
