AUD/USD remains steady at around 0.6275 during the early Asian session. US President Donald Trump plans to announce reciprocal tariffs that could affect Chinese imports.
Trump has imposed a 20% tariff on all Chinese goods since January. This potential trade conflict may put selling pressure on the Australian dollar, given China’s role as a key trading partner.
RBA Holds Cash Rate Steady
The Reserve Bank of Australia (RBA) held the Official Cash Rate at 4.10% after its April meeting. Its statement reflects concerns about ongoing inflation moderation.
China’s Caixin Manufacturing PMI improved to 51.2 in March, exceeding expectations. This data supports the Australian dollar amid positive economic signals from China.
The value of the Australian dollar is driven by RBA interest rates, the health of the Chinese economy, iron ore prices, and the Trade Balance. A robust Chinese economy enhances demand for Australian exports, while higher iron ore prices typically strengthen the currency.
Additionally, a positive Trade Balance supports the Australian dollar, as it indicates higher earnings from exports compared to import costs. Negative balances can adversely affect its value.
Clashing Policies And Market Sentiment
What we’re seeing now in the Australian dollar (AUD) appears to be a standoff between positive cues from overseas economic data and fears over trade friction. While the AUD/USD pair is holding ground near 0.6275, that stability could be easily unsettled by policy shifts out of Washington.
Tariff announcements from the White House have a way of sending ripples through currencies connected to export-heavy economies. In this case, the mere hint of reciprocal moves targeting goods from Beijing introduces a layer of caution. Trump’s decision to keep tariffs at 20% since January has done more than strain trade relations—it has also made traders assess how exposed countries like Australia, with deep linkages to China, stand to be affected.
There’s also a policy contrast building beneath the surface. The Reserve Bank opted for no change, keeping the benchmark interest rate at 4.10%, but this isn’t a passive stance. The board’s language suggests it still sees inflation on a downward slope, but not one moving fast enough to relax altogether. Rate-sensitive assets could respond quickly to any future signs that this forecast is too optimistic.
At the same time, Caixin’s surprise print on Chinese manufacturing confidence offered a more upbeat picture. The metric breaching into expansion territory (above 50) bolsters hopes for sustained demand from the region. That has implications for both Australia’s export flow and overall risk appetite.
When mining and commodities make up such a large slice of national earnings, movements in iron ore prices will trigger immediate reactions in currency markets. Iron ore, along with broader export figures, determines whether the nation ends up with a surplus or deficit on the Trade Balance. A surplus often strengthens the currency by increasing foreign income, while a deficit does the opposite.
For anyone watching price action, this is where attention needs to remain sharp. Market participants would do well to track China’s upcoming industrial and GDP data sets closely, as these might confirm whether the positive March figures were a one-off or part of a longer trend. Likewise, sudden shifts in US tariff policy—even before implementation—may spark repositioning.
The current exchange rate behaviour doesn’t show panic, but that doesn’t imply calm either. Short-term traders may find opportunity in range-bound setups now, though the risk profile could change dramatically if either geopolitical moves or new macro indicators surprise to the downside.
What’s important over the next fortnight is to remain nimble. Yield outlooks, commodity trends, and signals from central banks abroad still matter, but unexpected shocks—from trade measures to inflation prints—are likely to have amplified effects in what remains a sensitive spot on the global currency map.
