Australian Dollar holds steady as tariffs fears cool

The Aussie inches up to 0.6280 on Wednesday.
Trump’s softer-than-expected China tariffs stance underpins mild risk appetite.
Investors await January’s flash US S&P Global PMI data for fresh direction.

Patricio Martín FXStreet

AUD/USD rises to a new monthly high just below 0.6300, helped by signs that United States (US) tariffs on China may not be as harsh as initially feared. Meanwhile, the US Dollar (USD) recovers slightly from multi-day lows, reflecting ongoing uncertainty regarding future US trade policies. Market participants look forward to the upcoming flash S&P Global PMI numbers for January to gauge broader economic sentiment.

Daily digest market movers: Aussie extends gains while markets await fresh drivers

The amount of China-specific tariffs proposed under Donald Trump’s revised plan appears significantly smaller than originally anticipated, calming some market nerves.
The US Dollar briefly slumped to a fresh two-week low near 107.75 before staging an intraday rebound, with the Dollar Index (DXY) edging higher.
Traders brace for the US S&P Global PMI for January release on Friday for clues about near-term economic trends.
On the negative tone for the Aussie, the Reserve Bank of Australia (RBA) is considering a potential rate cut at its upcoming February meeting to counter moderate domestic growth and receding inflation.
In addition, the AUD also contends with subdued consumer sentiment, softer commodity performance, and sluggish demand from key trade partner China.

AUD/USD technical outlook: The pair stays in a 0.6180–0.6280 range with a mildly positive bias

AUD/USD mildly rose to 0.6280 on Wednesday, extending its choppy price action and the pair has oscillated between 0.6180 and 0.6280 in the first weeks of January. The Moving Average Convergence Divergence (MACD) histogram prints rising green bars but remains fairly flat, signaling modest bullish momentum. The Relative Strength Index (RSI) stands at 60, climbing upward yet flattening slightly, indicating a cautious tilt toward buyers. A sustained push above 0.6300 could strengthen the recovery, whereas a dip beneath 0.6180 might rekindle near-term selling pressure.

RBA FAQs

What is the Reserve Bank of Australia and how does it influence the Australian Dollar?

The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.

How does inflation data impact the value of the Australian Dollar?

While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.

How does economic data influence the value of the Australian Dollar?

Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.

What is Quantitative Easing (QE) and how does it affect the Australian Dollar?

Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.

What is Quantitative tightening (QT) and how does it affect the Australian Dollar?

Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.

Author

Patricio Martín

FXStreet

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

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

Editor's Picks

EUR/USD holds steady above 1.1750 as traders await FOMC Minutes

The EUR/USD pair holds steady near 1.1770 during the early Asian session on Tuesday. Traders continue to price in the prospect of further rate cuts by the US Federal Reserve in 2026, following the 25-basis-point rate reduction delivered at the December meeting. The release of the Federal Open Market Committee Minutes will be in the spotlight later on Tuesday.

GBP/USD finds key support near 1.35 despite year-end grind

GBP/USD remains bolstered on the high end as markets grind through the last trading week of the year. Cable caught a bullish tilt to keep price action on the high side of the 1.3500 handle, though year-end holiday volumes are unlikely to see significant progress in either direction as 2025 draws to a close.

Gold rebounds to near $4,350 after Monday's 4+% correction

Gold is bouncing to near $4,350 early Tuesday, helped by renewed US Dollar weakness and a dismal mood. Gold was hit sharply by profit-taking on Monday during US trading hours and retreated towards $4,300, where buyers reappeared.

Crypto market outlook for 2026

Year 2025 was volatile, as crypto often is. Among positive catalysts were favourable regulatory changes in the U.S., rise of Digital Asset Treasuries, adoption of AI and tokenization of Real-World-Assets.

Economic outlook 2026-2027 in advanced countries: Solidity test

After a year marked by global economic resilience and ending on a note of optimism, 2026 looks promising and could be a year of solid economic performance. In our baseline scenario, we expect most of the supportive factors at work in 2025 to continue to play a role in 2026.

Crypto market outlook for 2026

Year 2025 was volatile, as crypto often is. Among positive catalysts were favourable regulatory changes in the U.S., rise of Digital Asset Treasuries (DAT), adoption of AI and tokenization of Real-World-Assets (RWA).