AUD/USD is trading around 0.6280, remaining under pressure despite positive Chinese PMI data. China’s Caixin Services PMI reached 51.9 in March, surpassing expectations.
The Australian Dollar is affected by new tariffs imposed by the US, particularly a 54% tariff on Chinese imports. This has led to a cautious trading environment as Australia relies heavily on trade with China.
Impact Of Weak Trade Surplus
Australia’s trade surplus decreased to 2,968 million MoM in February, below the anticipated 5,600 million. Exports fell by 3.6% while imports rose by 1.6% during the same month.
Concerns about an economic slowdown in the US may weaken the USD in the near term. Upcoming reports on jobless claims and PMIs will be closely monitored for their potential impact on AUD/USD.
With AUD/USD holding just above 0.6280, pressure continues to build, even in the face of stronger-than-expected Chinese services data. The Caixin Services PMI pulling ahead to 51.9 in March offered a short-lived moment of optimism. Ordinarily, such a surprise would provide some lift to demand-sensitive currencies like the Aussie. That didn’t happen, though — and that in itself is telling.
Tariffs have altered the backdrop. The U.S. announcement of a sharply higher 54% tariff on goods from China introduces fresh imbalance. Although the move targets China directly, Australia, as a major trading partner, is exposed indirectly. There’s been no direct response from Beijing yet, but the secondary effects are already showing in trade flows.
Market Positioning And Volatility Dynamics
The narrowing of February’s trade surplus reflects that shift. At just under $3 billion, it marks a clear deviation from prior months. A 3.6% drop in exports, paired with a 1.6% climb in imports, underscores the fragility of Australia’s current trade dynamics. For speculative traders, it’s difficult to ignore the inventory and pricing consequences that may bleed into next quarter.
Concerns are growing elsewhere. There’s chatter about the strength of the U.S. economy faltering. If confirmed by near-term data, especially jobless claims and services or manufacturing PMIs, we might see downward adjustment in USD valuations. Right now, the market seems locked in on how U.S. labour and factory activity sustain under current interest rate settings. A softer read would recalibrate risk positioning.
From our vantage point, flows continue to favour hedges rather than outright directional bets. Most of the movement in the Aussie seems tied more to what’s absent — namely, any definitive risk-on momentum — than what’s present. There’s no coordinated effort from larger funds yet, which explains the choppy sessions.
As implied volatilities tick higher, especially toward the front end of the curve, the cost of downside protection edges up. It’s not just about holding exposure — it’s about timing entries and exits with far greater care than earlier in the year. Those dealing in forward contracts or short-dated options may find it more cost-effective to reduce notional size than chase directional targets.
All eyes are now on the U.S. data stream. Any blowout in jobless claims or drop below the 50 mark for either PMI could shift the bias temporarily in favour of the Aussie. Even then, follow-through seems unlikely without a broader improvement in the high-frequency Chinese numbers, given the trade linkage.
We’re approaching a period where noise may outweigh signal, requiring more frequent recalibration. Keep an eye on skew changes and open interest shifts in AUD/USD puts. They tend to lead spot direction during uncertain periods like this. Steer clear of large positions where the risk-reward is limited by tight ranges, and focus instead on holding flexibility as macro narratives compete.
