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- AUD/USD trades with mild gains near 0.6330 in Friday’s early Asian session.
- The US ISM Services PMI dropped to 50.8 in March, weaker than expected.
- China threatens retaliation after Trump hits it with a total of 54%, the highest US tariff on any country.
The AUD/USD pair edges higher to around 0.6330 during the early Asian session on Friday. The US Dollar (USD) weakens against the Australian Dollar (AUD) as US President Donald Trump’s fresh trade tariffs stoke fears of a global recession. Traders will closely monitor the US Nonfarm Payrolls data from March, which will be released later on Friday.
Worries about the impact of an escalating global trade war and a slew of weaker-than-expected US data raise the fear of a sharp global economic slowdown, which drags the USD lower broadly. Data released by the Institute for Supply Management (ISM) on Thursday showed that the US Services Purchasing Managers Index (PMI) eased to 50.8 in March from 53.5 in February. This reading came in lower than the estimation of 53.0.
The Trump administration on Wednesday announced that the US will impose a 10% baseline tariff on all imports to the United States (US). China was hit hard, facing a tariff of at least 54% on many goods. Chinese authorities threaten retaliation after Trump hits it with the highest US tariff on any country. This, in turn, might exert some selling pressure on the China-proxy Aussie, as China is the major trading partner to Australia.
However, the encouraging Chinese economic data might help limit the AUD’s losses. China’s Caixin Services PMI improved to 51.9 in March from 51.4 in February. This figure came in stronger than the 51.6 expected.
Australian Dollar FAQs
What key factors drive the Australian Dollar?
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
