The Australian Dollar (AUD) faced downward pressure due to concerns over Donald Trump’s proposed tariffs on Chinese goods, which could impact Australia’s markets as China is one of its largest trading partners. The AUD also faced challenges from lower-than-expected Chinese Consumer Price Index (CPI) data and China’s stimulus measures falling short of investor expectations. However, the AUD managed to gain ground on Monday despite these negative factors, with US markets closed for the Veteran’s Day Bank Holiday.
China’s latest stimulus measures, including a 10 trillion Yuan debt package, did not include direct economic stimulus measures, adding to concerns about the country’s economic growth and its impact on the Australian Dollar. Additionally, Australia’s 10-year government bond yield dropped to around 4.6%, following the Federal Reserve’s interest rate cut and the RBA’s decision to keep interest rates unchanged at 4.35%. The RBA highlighted that underlying inflation remains high and is not expected to return to its target until 2026.
Federal Reserve Bank of Minneapolis President Neel Kashkari mentioned that the US economy has shown resilience, but the Fed is still cautious about inflation. A report from Morgan Stanley divided Trump’s macroeconomic policies into tariffs, immigration, and fiscal measures, predicting potential inflation risks if implemented. Fed Chair Jerome Powell stated that the Fed will continue to assess economic data to make future rate decisions, focused on achieving the 2% inflation target.
China’s CPI rose 0.3% year-over-year in October, below market expectations, marking the ninth consecutive month of consumer price inflation but at the lowest rate since June. The preliminary University of Michigan Consumer Sentiment Index rose in November, while US Initial Jobless Claims also increased to 221,000. Technical analysis indicated short-term downward pressure on the AUD/USD pair, with the pair trading below the nine-day EMA and the RSI below 50.
The Reserve Bank of Australia influences the AUD through interest rate adjustments to maintain stable inflation. China’s economic health, as Australia’s largest trading partner, impacts the AUD, with positive or negative growth data directly influencing the currency. Iron Ore prices, Australia’s largest export, also drive the AUD, with higher prices leading to increased demand for the currency. The Trade Balance, the difference between exports and imports, also affects the value of the AUD, with a positive balance strengthening the currency.
In conclusion, the Australian Dollar continues to face challenges from external factors such as Trump’s tariff threats, Chinese economic data, and global economic uncertainties. However, the currency managed to gain some ground despite these pressures. The RBA and the Fed’s monetary policies, along with economic data releases from both Australia and the US, will continue to impact the AUD in the near term. Investors will closely monitor developments in China, US-China trade relations, and global market sentiment to gauge the future direction of the Australian Dollar in the forex market.
