Australian Dollar Rises on Renewed Global Risk Appetite After US Tariff Exemptions

• The Australian Dollar gained strength following President Trump’s decision to exclude certain key technology products — some originating from China — from the newly announced “reciprocal” tariffs
• The RBA meeting minutes revealed uncertainty regarding when the next interest rate adjustment might occur.
• The US Dollar is attempting to stabilize as investors assess growing fears of stagflation.

The Australian Dollar (AUD) extended its winning streak on Tuesday, marking a fifth consecutive session of gains against the US Dollar (USD). The upward momentum in the AUD/USD pair followed a move by US President Donald Trump to exclude certain key technology goods from newly announced “reciprocal” tariffs—an action that boosted investor confidence and global risk sentiment.

The exemption list includes products predominantly manufactured in China, such as smartphones, computers, semiconductors, solar panels, and flat-panel displays. This development provided support to the Aussie, given Australia’s strong trade ties with China and its heavy reliance on Chinese demand for raw materials and commodities.

Meanwhile, minutes from the Reserve Bank of Australia’s (RBA) meeting held on March 31–April 1 indicated uncertainty regarding the timing of the next interest rate adjustment. While officials suggested that the May meeting could serve as a suitable opportunity to reevaluate monetary policy, they made it clear that no firm decision had been made.

The RBA noted that global uncertainties—particularly concerning US trade policies—pose significant risks to the economic outlook. The Board acknowledged the presence of both upside and downside risks to domestic growth and inflation.

Australia’s 10-year government bond yield declined to around 4.33%. Although the central bank left interest rates unchanged this month, it struck a more cautious tone regarding future policy direction, citing subdued underlying inflation. Market participants are currently pricing in a 25-basis point rate cut in May, with expectations for approximately 120 basis points of easing over the remainder of the year.

Australian Dollar Strengthens as Investor Confidence in US Assets Wanes

• The US Dollar Index (DXY), which tracks the dollar’s performance against six key global currencies, edged up slightly after reaching its lowest point since 2022. Currently hovering near 99.90, the index is showing signs of stabilizing as investors weigh increasing concerns over potential stagflation.
• Atlanta Federal Reserve President Raphael Bostic stated early Tuesday that the central bank still faces a lengthy path toward reaching its 2% inflation goal, challenging market assumptions about further interest rate reductions.
• In April, the University of Michigan’s consumer sentiment index fell to 50.8, reflecting growing concerns among consumers. Meanwhile, expectations for one-year inflation jumped to 6.7%. The Producer Price Index (PPI) increased by 2.7% year-over-year in March, slowing from February’s 3.2%, with core PPI also easing to 3.3%. Initial jobless claims rose slightly to 223,000, but continuing claims edged down to 1.85 million, suggesting a labor market with mixed signals.
• On Sunday, Neel Kashkari, President of the Minneapolis Federal Reserve, told CBS’ Face the Nation that the economic impact of Trump’s trade war would largely hinge on how quickly trade-related uncertainties are addressed. Kashkari noted, “This is the most significant blow to confidence I’ve experienced in my 10 years at the Fed, aside from the initial onset of COVID in March 2020.”
• Rising trade tensions between the United States and China have reignited fears of a global economic slowdown. On Friday, China’s Ministry of Finance declared a significant hike in tariffs on American goods, increasing them from 84% to 125%. This decision was made in retaliation to President Trump’s previous move to escalate tariffs on Chinese imports to 145%.
• US Consumer Price Index (CPI) inflation moderated to 2.4% year-on-year in March, down from 2.8% in February and lower than the expected 2.6%. Excluding food and energy prices, Core CPI increased by 2.8% compared to the previous 3.1%, missing the forecast of 3.0%. On a month-to-month basis, overall CPI declined by 0.1%, while core CPI saw a slight rise of 0.1%.
• Minutes from the latest Federal Open Market Committee (FOMC) Meeting suggested that policymakers are nearly unanimous in recognizing the dual challenge of rising inflation and slowing growth, cautioning that the Federal Reserve faces “difficult tradeoffs” in the months ahead.
• China’s Trade Balance for March, measured in Chinese Yuan (CNY), recorded a substantial increase to CNY 736.72 billion, up sharply from CNY 122 billion in the previous month. In US Dollar (USD) terms, the trade surplus also exceeded expectations, coming in at $102.6 billion—well above the forecast of $77 billion, though lower than the prior $170.51 billion.
• China’s Exports rose 13.5% year-over-year in March, accelerating from 3.4% in February, while imports declined 3.5% YoY, a smaller drop compared to the 7.3% contraction previously reported.
• The General Administration of Customs of China recognized the difficulties impacting the country’s exports, describing the current external situation as “complex and severe.” However, officials maintained optimism, asserting that “the sky will not fall.” They highlighted a strong beginning to the year, with foreign trade demonstrating growth in both volume and quality. Additionally, the agency reaffirmed China’s determination to implement all necessary actions in response to US policies, ensuring the protection of its national sovereignty and security.
• The People’s Bank of China (PBoC) is likely to pursue additional monetary easing in the second quarter of 2025. This could involve a possible 15 basis point reduction in the loan prime rate (LPR) and at least a 25 basis point cut to the reserve requirement ratio (RRR). Analysts at Citi, referenced in a Reuters report, note that there is growing speculation that domestic stimulus efforts may be expedited in light of rising external challenges.

Australian Dollar Strengthens to Nearly 0.6350 Amid Ongoing Bullish Momentum

The AUD/USD pair is hovering near the 0.6340 level on Tuesday, with daily chart technicals indicating a bullish outlook. The pair continues to trade above both the 9-day and 50-day Exponential Moving Averages (EMAs), while the 14-day Relative Strength Index (RSI) has climbed past the neutral 50 threshold, signaling sustained upward momentum.

Looking ahead, the pair could target the 0.6400 psychological barrier, followed closely by the recent four-month peak at 0.6408.

On the downside, initial support lies around the 50-day EMA near 0.6270, with additional backing from the 9-day EMA at approximately 0.6240. A decisive drop below these support zones could challenge the current bullish trend and potentially lead to a deeper pullback toward the 0.5914 area—the lowest level since March 2020—and the significant 0.5900 psychological mark.

AUD/USD: Daily Chart