Australian Dollar extends recovery as USD slides toward multi-year lows
- AUD/USD trades near the 0.6280 region during Friday’s American session, extending this week’s rebound.
- US sentiment data deteriorates further as tariff risks weigh on Fed flexibility and inflation expectations.
- Key resistance is seen near 0.6240-0.6260, while downside is cushioned by 0.6180 support.
The Australian Dollar (AUD) is strengthening on Friday, with the pair moving near the 0.6280 zone during the American session. The bullish tone for the Aussie emerges as the US Dollar (USD) continues to weaken across the board, dragged by lower-than-expected economic data and growing investor concern over inflation and trade policy. While momentum is cautiously improving, the broader trend remains technically bearish, with resistance zones limiting additional upside for now.
Daily digest market movers: US Dollar drops on consumer gloom and tariff fallout
- The US Dollar Index (DXY) continues to weaken, sliding toward the 100 area and marking fresh three-year lows during Friday’s trade.
- April’s University of Michigan sentiment survey missed expectations, while soft PPI figures revived disinflation concerns.
- Federal Reserve (Fed) policymakers remain cautious, warning that while core inflation expectations are still stable, tariff-driven price pressures may persist longer than anticipated.
- President Trump reiterated his confidence in reaching a deal with China, although tariffs remain elevated—145% on Chinese imports and 10% across the board for other nations.
- Fed’s Musalem and Williams noted that a potential shift in long-term inflation expectations could limit the Fed’s policy options in the coming quarters.
(The technical analysis part of this article was removed on May 22 as it didn't comply with FXStreet's editorial standards regarding the use of Artificial Intelligence.)
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.
Author
Patricio Martín
FXStreet
Patricio is an economist from Argentina passionate about global finance and understanding the daily movements of the markets.
