The Australian Dollar (AUD) has remained weak against the US Dollar (USD) for a second consecutive day, influenced by the USD’s steadiness. Traders are monitoring global trade developments as Canada delays retaliatory tariffs until April 2, following US President Trump’s exemptions for certain goods.
The Reserve Bank of Australia (RBA) projects economic growth to slow towards 2% by 2025. Recent Australian GDP data showed a 0.6% quarter-over-quarter growth in Q4 2024, exceeding expectations, while annual GDP rose to 1.3%.
Geopolitical Tensions And Trade Risks
Geopolitical tensions pose a downside risk, as China warns it is ready to respond to escalating trade tariffs. The US Dollar Index was at 104.10, experiencing pressure from concerns over slowing economic performance.
Friday’s US Nonfarm Payrolls report is anticipated to show job additions of 160K for February, an increase from January’s 143K. Initial Jobless Claims fell to 221K, lower than expected, while the ADP Employment Change for February reported only 77K new jobs, beneath forecasts.
Australia’s trade surplus reached 5,620 million in January, surpassing estimates, driven by a 1.3% increase in exports. Building permits surged 6.3% month-on-month in January, marking significant growth.
The Judo Bank Composite Purchasing Managers’ Index (PMI) declined to 50.6 in February, reflecting slower expansion in business activity. The RBA has noted that global trade uncertainty is at a historic high, likely affecting economic growth.
AUD/USD is trading near 0.6320, with key resistance levels at 0.6408 and 0.6440. Immediate support is at 0.6309 and 0.6299, with a potential decline to a four-week low of 0.6187 if these levels are breached. The AUD was weakest against the Euro.
Tariff Strategies And Economic Impact
Tariffs implemented by the US aim to bolster domestic industries, with mixed views among economists regarding their efficacy. Trump has indicated plans to use tariffs to support American producers leading up to the 2024 presidential election, focused primarily on Mexico, China, and Canada.
Given the recent movements, those trading in derivatives should prepare for a US Dollar that remains firm in the near term. With Washington’s economic strategy reinforcing domestic industries, demand for the greenback could persist. The weaker Australian Dollar reflects ongoing uncertainty, and with the Reserve Bank of Australia expecting slower growth, upward pressure on the currency appears limited.
We’ve seen GDP figures slightly outpace expectations, yet they remain far below levels that would suggest robust expansion. The housing market has shown resilience, as reflected by the notable rise in building approvals, but this is unlikely to offset broader concerns surrounding external trade conditions.
Trade relations remain a major factor, particularly with Beijing signalling it may react sharply to new tariffs. While this hasn’t yet resulted in direct action, it poses a risk that cannot be ignored. Should tensions escalate, confidence in global trade could falter further, impacting risk-sensitive currencies.
Labour market figures out of the US have shown mixed results. While jobless claims surprised to the downside, private-sector hiring came in markedly softer than predicted. Friday’s Nonfarm Payrolls report will provide a clearer indication of employment strength. A figure above estimates would likely bolster the US Dollar, while a weaker reading could temper its recent momentum.
Australia’s trade surplus was larger than anticipated, aided by stronger export performance. This suggests external demand remains relatively stable for now. However, given the ongoing policy shifts in North America, sustained performance here cannot be taken as a given.
Technical levels indicate immediate support around 0.6309 and 0.6299. If these fail to hold, a move towards 0.6187 appears likely, marking the lowest level in roughly a month. On the upside, resistance near 0.6408 and 0.6440 would need to be cleared before any meaningful recovery could take place.
The US administration remains committed to tariff strategies, with a focus on manufacturing and trade balances. With the presidential election drawing closer, further policy announcements could emerge. Any developments on additional trade measures or exemptions will be pivotal in shaping sentiment in the sessions ahead.
