The AUD/USD pair is trading slightly lower, holding above 0.6200, amid pressure from the announcement of additional 10% tariffs on China by US President Trump. The Australian Dollar is under selling pressure despite the US Dollar weakening, suggesting underlying issues for the AUD.
During European trading hours, Audi’s value declined 0.1% to around 0.6220 as the US Dollar Index approached an 11-week low of 106.15. Rising tariffs may hinder Australia’s trade competitiveness with China, which is its largest trading partner.
Australian Retail Sales Outlook
An anticipated rise in Australian Retail Sales could help support the AUD. Retail Sales improved by 0.3% in January after a 0.1% decline in December.
Meanwhile, expectations have grown that the Federal Reserve may initiate monetary expansion, increasing the likelihood of interest rate cuts in June to 87%. This is up from the previous week’s 69%, indicating increasing pressure on the US Dollar.
The Australian Dollar continues to struggle despite broader weakness in the US Dollar. This suggests that concerns for the currency are not solely linked to external pressures but may also be tied to internal economic factors. For those tracking short-term movements, this divergence is something that cannot be ignored.
Tariff announcements have once again unsettled markets. With further levies on Chinese goods, the indirect impact on Australia becomes apparent. The country’s heavy reliance on trade with China means any barriers to growth in Beijing could trickle down. The marginal slip in value during European hours reinforces the view that traders remain cautious.
Federal Reserve Rate Cut Expectations
Retail Sales figures in Australia provide some optimism. A shift from negative to positive monthly growth could support sentiment. But one data point does not dictate a trend. Whether consumer spending maintains momentum in the months ahead will determine if this recovery is sustainable or merely a short reprieve.
On the other side of the equation, the Federal Reserve’s stance appears to be adjusting. A rising probability of interest rate reductions shifts expectations. A cut in June now seems priced in more heavily than it was just a week ago. The implications for the Dollar are straightforward: a looser policy stance could apply further downward pressure.
For those analysing derivatives, balancing these signals becomes essential. If US Dollar softness persists while concerns around tariffs continue to weigh on the Australian currency, movements may become choppy. Adjusting positions based on shifts in interest rate expectations and trade-related developments will be key in the coming sessions.
