AUD/USD: RBA and China in Focus
In the case of the Australian dollar, AUD/USD trends hinge on wage growth and inflation figures. Softer wage growth and inflation could cement bets on a February RBA rate cut and signal a more dovish RBA rate path.
However, Trump’s tariff plans also require consideration. Tariffs on China could impact demand, potentially affecting Aussie trade terms. China accounts for one-third of Australia’s exports. With a trade-to-GDP ratio above 50%, weaker demand from China could affect the Aussie economy and labor market. Significantly, around 20% of Australia’s workforce is in trade-related jobs.
Falling inflation and weaker demand might enable the RBA to cut rates more aggressively. In December, RBA Governor Michele Bullock highlighted the significance of China and US policy, saying,
“US moves against China could affect Aussie trade terms with China, potentially impacting the Aussie economy.”
Expectations of a February rate cut and hints at a more dovish RBA rate path may pull the AUD/USD pair toward $0.60. Conversely, a February cut and a wait-and-see approach may drive the pair toward $0.63.
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Australian Dollar Daily Chart
In the US session, US tariff developments and FOMC member commentary require monitoring.
Threats of sweeping tariffs could fuel inflation concerns, potentially delaying Fed rate cuts. A widening US-Aussie interest rate differential, favoring the US dollar, could drag the AUD/USD pair toward $0.60. Conversely, discussions about a gradual tariff rollout and a more dovish Fed rate path would likely push the pair toward $0.63.