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21 Mar 2025
AUD/USD hangs near weekly low, remains depressed below 0.6300 on stronger USD
- AUD/USD remains under some selling pressure on Friday amid a modest USD strength.
- Thursday’s disappointing jobs data undermines the Aussie and contributes to the slide.
- The optimism over China’s stimulus and hopes for a US-China trade deal to limit losses.
The AUD/USD pair struggles to capitalize on the overnight bounce from the 0.6270 area or a one-week low and meets with a fresh supply on Friday. Spot prices remain depressed below the 0.6300 mark through the first of the European session and could slide further amid a goodish pickup in the US Dollar (USD) demand.
The Federal Reserve (Fed) maintained its forecast for two 25 basis points rate cuts in 2025 at the end of March policy meeting on Wednesday and gave a bump higher to its inflation projection. The outlook assists the Greenback to build on its modest recovery from a multi-month low for the third straight day and climb to a fresh weekly high. Apart from this, concerns about the potential economic fallout from US President Donald Trump's trade tariffs and geopolitical risks benefit the safe-haven buck. This, in turn, is seen exerting pressure on the AUD/USD pair.
The Australian Dollar (AUD), on the other hand, is undermined by the disappointing domestic jobs report released on Thursday, which showed that the number of employed people declined by 52.8K in February. The reading missed consensus estimates for a 30.0K increase by a big margin and raised concerns about potential weakness in the labor market. This could provide the Reserve Bank of Australia (RBA) more room to lower interest rates, which keeps the AUD bulls on the defensive and further contributes to the offered tone surrounding the AUD/USD pair.
Any meaningful USD appreciation, however, still seems elusive amid expectations that the Fed will resume its rate-cutting cycle sooner than expected amid worries about a tariff-driven slowdown in the US economic activity. Adding to this, the optimism over China's recent stimulus measures and hopes for a US-China trade deal could limit losses for the China-proxy Aussie. US Senator Steve Daines will visit China for trade talks – marking the first high-level political meeting since Trump’s return – to revive stalled trade negotiations amid rising tariff tensions.
Moving ahead, there isn't any relevant market-moving economic data due for release from the US on Friday, leaving the USD at the mercy of speeches from influential FOMC members. This, in turn, could provide some impetus to the AUD/USD pair and produce short-term trading opportunities heading into the weekend. Nevertheless, spot prices remain on track to register losses for the first time in three weeks as the focus now shifts to the release of the flash global PMIs on Monday.
US-China Trade War FAQs
Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. It implies the creation of trade barriers, such as tariffs, which result in counter-barriers, escalating import costs, and hence the cost of living.
An economic conflict between the United States (US) and China began early in 2018, when President Donald Trump set trade barriers on China, claiming unfair commercial practices and intellectual property theft from the Asian giant. China took retaliatory action, imposing tariffs on multiple US goods, such as automobiles and soybeans. Tensions escalated until the two countries signed the US-China Phase One trade deal in January 2020. The agreement required structural reforms and other changes to China’s economic and trade regime and pretended to restore stability and trust between the two nations. However, the Coronavirus pandemic took the focus out of the conflict. Yet, it is worth mentioning that President Joe Biden, who took office after Trump, kept tariffs in place and even added some additional levies.
The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China once he returned to office, which he did on January 20, 2025. With Trump back, the US-China trade war is meant to resume where it was left, with tit-for-tat policies affecting the global economic landscape amid disruptions in global supply chains, resulting in a reduction in spending, particularly investment, and directly feeding into the Consumer Price Index inflation.