Australian Dollar Struggles as US Dollar Holds Firm Ahead of PCE Data

• The Australian dollar will be amortized as global trade concerns intensifies against potential US tariffs.
• A Reuters survey suggests that the Reserve Bank of Australia (RBA) will stabilize interest rates in April.
• U.S. annual domestic production rose 2.4% in the fourth quarter of 2024, surpassing its 2.3% forecast.

The Australian Dollar (AUD) weakened against the US Dollar (USD) on Friday, reversing the gains seen in the previous session. The decline in the AUD/USD pair comes amid growing risk aversion fueled by concerns over looming US auto tariffs.

On Wednesday, US President Donald Trump issued an order imposing a 25% tariff on imported automobiles, further escalating global trade tensions. These aggressive measures could strain relations with key trading partners, especially with additional reciprocal tariffs scheduled for April 2.

A recent Reuters poll suggests that the Reserve Bank of Australia (RBA) is expected to keep interest rates unchanged in April. All 39 economists surveyed anticipate that the central bank will maintain its cash rate at 4.10% on April 1. However, the median forecast projects two rate cuts in 2025, with 25-basis-point reductions expected in May and September, lowering the rate to 3.60% by the third quarter.

The RBA is likely to take a cautious approach to monetary easing due to persistently high core inflation at 3.2%, low unemployment, and signs of economic recovery. The probability of a rate cut in May depends on Q1 inflation data, with around 75% of economists expecting a reduction.

Westpac economists predict that the RBA will leave rates unchanged at its April 1 meeting, describing the decision as largely predetermined in the broader context of monetary policy. However, they continue to foresee a rate cut in May.

Meanwhile, Australian Prime Minister Anthony Albanese announced on Friday that a national election will take place on May 3, initiating a five-week campaign expected to center on cost-of-living issues. Albanese’s Labor Party won a majority in the 2022 federal election, but recent polling suggests a close contest with the opposition Liberal-National coalition, especially when votes from smaller parties are considered.

Aussie Dollar Slips as US Dollar Holds Firm Amid Risk-Off Sentiment

• The US Dollar Index (DXY) pursuing USD compared to the six major currencies is around 104.30, and due to low US yields, it could be 3.99% for two-year bonds and 4.35% for 10-year bonds at the time of writing.
• US gross domestic production (GDP) expanded at a rate of 2.4% in the fourth quarter of 2024, surpassing data released on Thursday by 2.3%. Investors are currently awaiting a price index for personal consumption expenditures (PCE) that was published on Friday.
• Moody S warns that increased tariffs and tax cuts could significantly increase the state’s deficit, which could lead to an increase in the US debt valuation and financial sector.
• S&P Global cautioned that policy uncertainty in the US could dampen global economic growth, while Fitch Ratings highlighted that current tariffs may severely impact smaller economies such as Brazil, India, and Vietnam, making it more challenging for them to afford US goods.
• Federal Reserve (Fed) Bank of Boston President Susan Collins stated on Thursday that the Fed faces a difficult decision between maintaining a restrictive policy stance or acting pre-emptively in anticipation of deteriorating economic conditions.
• Meanwhile, Federal Reserve Bank of Richmond President Thomas Barkin warned that economic uncertainty stemming from the Trump administration’s trade policies could force the Fed into a more cautious, wait-and-see approach than markets are expecting.
• St. Louis Fed President Alberto Musalem made strong remarks on Wednesday, joining a growing number of Fed policymakers warning about the Trump administration’s tariff policies. Musalem cautioned that these measures are disrupting the stable US economy, increasing uncertainty, and driving inflation higher.
• President Trump announced plans to cut China’s tariffs on Wednesday, facilitating the sale of Tycok’s US operations. He emphasized that tariffs are worth more than the tickok itself, but he suggested that mild tariff cuts could help close the transaction. Trump also showed the opportunity to extend the deadline for the Tycox sale again.
• On Wednesday, Trump proposed a plan to force tariffs on copper imports within weeks, but the trade sector initially had time to select the issue until November 2025. However, this development supported AUD as Australia is a key copper exporter.
• Australian treasurer Jim Chalmers presented his 2025/26 budget on Tuesday, outlining a key economic forecast and tax cuts of around $17.1 billion in two laps. The fiscal deficit is projected to be USD 27.6 billion from 2024-25, at $42.1 billion from 2025-26. GDP growth is expected to reach 2.25% in 2026 and 2.5% in 2027. Tax cuts appear to be aimed at strengthening political support.

Australian Dollar Steady Near 0.6300 Amid Technical Resistance

AUD/USD hovers around 0.6290 on Friday, with technical indicators hinting at a possible bullish shift as the pair tests its descending channel pattern. However, the 14-day Relative Strength Index (RSI) remains slightly below 50, indicating lingering bearish pressure.

The nine-day Exponential Moving Average (EMA) at 0.6304 serves as an immediate resistance level. A breakout above this point could boost short-term momentum, potentially leading to a test of the monthly high at 0.6391, last seen on March 18, followed by a three-month high at 0.6408.

On the downside, if the pair fails to sustain its gains, it may re-enter the descending channel, reinforcing a bearish outlook. In such a case, AUD/USD could decline toward the seven-week low of 0.6187, recorded on March 5, with further support at the channel’s lower boundary of 0.6170.

AUD/USD: Chart