|

AUD/USD tumbles to near 0.6300 as US Dollar extends recovery, soft CPI

  • Australian Dollar declines as subdued inflation dims hopes for aggressive rate cuts, pressuring the Aussie’s recent rally.
  • US House of Representatives passes Trump’s tax cut bill, elevating the Greenback despite uncertain tariff developments.
  • Softer growth in Australia’s Consumer Price Index intensifies speculation around potential monetary policy actions by the RBA.
  • Donald Trump confirmed that tariffs on Mexico and Canada will take effect in April.

AUD/USD falls to near 0.6300 as the US Dollar (USD) extends its recovery. The United States (US) House of Representatives passed President Donald Trump’s tax cut bill, boosting the Greenback. Meanwhile, slower-than-expected inflation growth in Australia adds to the Aussie’s woes, following last week’s 25 basis points rate cut by the Reserve Bank of Australia (RBA).

Daily digest market movers: Aussie battles inflation slowdown and tariffs

  • Market participants note subdued growth in the Australian Monthly Consumer Price Index at 2.5% year-on-year, softer than the 2.6% forecast, maintaining concerns about the RBA’s inflation outlook.
  • The RBA recently lowered its Official Cash Rate to 4.10%, reiterating that controlling inflation is far from complete, and future actions will rely on persistent price and wage signals.
  • Softer monthly CPI data fosters uncertainty over Australia’s economic resilience, while US President Donald Trump’s revived tariff threats keep investors alert to potential disruptions.
  • Trump reiterated plans to impose a 25% levy on imports from Canada and Mexico but pushed them to April.
  • Investor attention also turns to US Personal Consumption Expenditure Price Index data, a key inflation measure used by the Federal Reserve for guiding interest rate decisions.

AUD/USD technical outlook: RSI near midpoint, momentum falters as pair nears 20-day SMA

AUD/USD sees moderate losses on Wednesday, with the Aussie near 0.6315 after a four-day losing streak. The Relative Strength Index (RSI) hovers in a neutral region but is declining sharply, suggesting a weakening bullish momentum. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram prints decreasing green bars, indicating a loss of upside traction.

Although the pair remains above the 20-day Simple Moving Average, failure to reclaim the 100-day SMA does not imply a major structural shift, and the Aussie may continue to trade within these moving average boundaries unless new data sparks a more decisive move.

Tariffs FAQs

Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.

Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.

There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.

During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.

Author

Patricio Martín

Patricio is an economist from Argentina passionate about global finance and understanding the daily movements of the markets.

More from Patricio Martín
Share:

Editor's Picks

AUD/USD consolidates above 0.7000; remains close to monthly top

AUD/USD holds steady above 0.7000 during the Asian session on Friday, trading just below the previous day's monthly low amid diverging forces. A hawkish RBA continues to support the Aussie, while the recent decline in US bond yields keeps the US Dollar depressed near a three-week low. However, oil-driven inflation fears reinforce Fed hike bets, which, along with geopolitical risks, could benefit the safe-haven buck and cap the currency pair.

USD/JPY bounces off one-month low; climbs to 157.00 amid reviving USD demand

USD/JPY rebounds from the 156.00 neighborhood, or a one-month low touched during Friday’s Asian session, with bulls looking to extend momentum beyond 157.00 amid the emergence of some US Dollar buying. Meanwhile, Japan's National CPI rose to a nine-month peak and reaffirmed BoJ rate-hike bets, which could support the Japanese Yen and cap gains for the currency pair.

Gold treads water around $4,000

Gold prices maintain its offered stance in place at the end of the week, hovering around the key $4,000 threshold per troy ounce. The persistent selling bias in the precious metal comes amid decent gains in the US Dollar and an acceptable rebound in US Treasury yields across the curve, all alongside further upside traction in crude oil prices.

Crypto Today: Bitcoin holds the 50-day EMA as Ethereum and XRP face structural resistance

Bitcoin gradually ticks up on Friday, trading above $81,000. The Crypto King has recently defended structural support near $80,000, reinforcing the prevailing bullish outlook. Ethereum similarly edges higher above $2,400, while Ripple trades above $1.32 after testing support around $1.30.

The French bond panic is overdone. Here's what the market is misreading 

France's 10-year government bond yield has climbed above 5%, reigniting fears of a sovereign debt crisis in the Eurozone. With public debt exceeding €3.5 trillion, persistent budget deficits and a fragmented political landscape, investors are increasingly questioning the French government's ability to stabilize its finances.

What November 3 means for the Fed's rate path and the US Dollar

The USD faces a decisive period ahead of the November 3 midterm elections. While markets anticipate another interest rate increase from the Fed in December, the battle for control of Congress could reshape fiscal policy expectations and, indirectly, the path of US monetary policy in 2027.