- The Australian dollar could face challenges due to rising trade tensions following President Trump's tariff hikes.
- The AUD could decline even further amid growing geopolitical risks as Israeli Prime Minister Netanyahu threatened to end the Gaza ceasefire.
- The US dollar could be strengthened as Fed Powell shows there is no urgency to cut interest rates.
The Australian Dollar (AUD) maintained its position against the US Dollar (USD) on Wednesday. However, the AUD/USD pair faced challenges due to President Donald Trump's 25% tariff hike and the chairman's indication that the central bank is not in a hurry to cut interest rates further.
President Trump's trade adviser Peter Navarro criticized Australia late Tuesday, accusing Trump of “killing the aluminum market” the day after Trump signed an executive order that imposed import duties on certain metals. Australia has sought a new steel and aluminum tariff exemption, and Trump has previously said he would give Australia's demands “big consideration” due to the imbalance in trade between the two countries.
Australia's Trade Minister Don Farrell reiterated on Monday that he was pushing for tariff exemptions similar to those Australia secured under the Trump administration in 2018.
Meanwhile, geopolitical risks remained rising. Israeli Prime Minister Benjamin Netanyahu warned that the ceasefire will end late Tuesday, warning that Israel would resume a “fierce battle” in Gaza if Hamas does not release the hostages by noon on Saturday did.
Domestic expectations are growing for a reduction in the Reserve Bank of Australia (RBA) rate. The central bank, which currently holds a cash rate of 4.35%, is widely expected to lower it at its February meeting. Traders have a 95% chance of being cut to 4.10%, as recent data suggests that RBA is cooling faster than expected.
Australian dollars may decline amid increasing probability of staying in Hawkish
- The US Dollar Index (DXY), which measures the value of the US dollar against six major currencies, remains at close to 108.00 at the time of writing.
- Traders are awaiting inflation in the US Consumer Price Index (CPI) scheduled for Wednesday. Headline US CPI inflation is expected to be 2.9% year-on-year, while core CPI inflation is projected to fall to 3.1% against the last print of 3.2%.
- In a six-month report to Congress, Fed Powell said Fed officials “don't have to hurry,” to cut interest rates for the strength of the job market and solid economic growth. It could put more upward pressure on prices, making it difficult for central banks to cut fees.
- A Reuters economist poll suggests that the Federal Reserve will delay cutting until the next quarter amid rising inflation concerns. Many who previously expected interest rate cuts in March have revised their forecast. Most economists surveyed between February 4 and 10 expect at least one rate to be cut by June, but opinions on the exact timing remain divided.
- The US dollar is receiving support as the US Federal Reserve is expected to remain stable this year, following its January employment report released Friday.
- US President Donald Trump has decided to increase tariffs on steel and aluminum by 25% to override trade agreements with major US allies, including Australia. The White House confirmed that all import tax exclusions have been removed and indicated that further actions on microchips and vehicles will be considered in the coming weeks.
- Bank of Chicago's Federal Reserve President Austan Ghoolsby said on Friday that inconsistent policies are approaching from the US government. It may be a heading.
- Meanwhile, Fed President Adriana Kugler noted that although US growth and economic activity remained healthy overall, progress towards the Fed's inflation targets is somewhat biased, according to Reuters. .
- In an interview with CNBC, Minneapolis Federal President Neil Kashkari said that looking at good inflation data, if the labour market remains strong, they will move towards helping further cut interest rates.
- China's Consumer Price Index (CPI) exceeded the market forecast of 0.4%, up from 0.1% in December, at 0.5% per year. Each month, CPI inflation rose 0.7% in January, but was not short of the expected 0.8% increase compared to the 0% flat reading in December.
Australian Dollar Test 0.6300; Support will be displayed in 9 Day EMA
The AUD/USD pair hovered near 0.6300 on Wednesday, maintaining a position above the 9- and 14-day exponential moving average (EMA) of the daily chart. This suggests a strong short-term price momentum. Additionally, the 14-day relative strength index (RSI) maintains position above the 50 mark, enhancing bullish bias.
The AUD/USD pair may explore a region of resistance with a high of 0.6330 for the eight weeks it last reached on January 24th.
The AUD/USD pair tests primary support on a 9-day EMA at a level of 0.6275, followed by a 14-day EMA at a level of 0.6267. A critical break below these levels could undermine short-term price momentum and could push the pair onto a psychological level of 0.6200.
AUD/USD: Daily Charts
Australian dollar prices today
The table below shows the rate of change in the Australian Dollar (AUD) for today's listed major currencies. The Australian dollar was the weakest against the New Zealand dollar.
| USD | EUR | GBP | JPY | CAD | aud | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.00% | -0.06% | 0.54% | 0.00% | -0.03% | -0.11% | -0.06% | |
| EUR | 0.00% | -0.05% | 0.52% | 0.00% | -0.04% | -0.10% | -0.06% | |
| GBP | 0.06% | 0.05% | 0.57% | 0.06% | 0.02% | -0.05% | -0.00% | |
| JPY | -0.54% | -0.52% | -0.57% | -0.53% | -0.57% | -0.65% | -0.59% | |
| CAD | -0.00% | -0.00% | -0.06% | 0.53% | -0.04% | -0.11% | -0.06% | |
| aud | 0.03% | 0.04% | -0.02% | 0.57% | 0.04% | -0.07% | -0.03% | |
| NZD | 0.11% | 0.10% | 0.05% | 0.65% | 0.11% | 0.07% | 0.04% | |
| CHF | 0.06% | 0.06% | 0.00% | 0.59% | 0.06% | 0.03% | -0.04% |
The heatmap shows the rate of change of each other's major currencies. The base currency is selected from the left column, and the estimated currency is selected from the top row. For example, if you select Australian dollars from the left column and move along the horizon to US dollars, the rate of change shown in the box represents AUD (base)/USD (QUOTE).
Customs FAQ
Duties are customs duties imposed on the import or product category of a particular product. Tariffs are designed to help local producers and manufacturers become more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as a tool for protectionism, along with trade barriers and import allocations.
Although both tariffs and taxes generate government revenue to fund public goods and services, there are several distinctions. Customs duties are paid upfront at the port of entry, but taxes are paid at the time of purchase. Taxes are levied on individual taxpayers and businesses, and customs duties are paid by the importer.
There are two ways of thinking among economists regarding the use of customs duties. Some argue that tariffs are necessary to protect domestic industries and address trade imbalances, but others could raise them high in the long term, and the Tat's tariffs Some view it as a harmful tool that could damage the trade war by encouraging it.
During preparations for the November 2024 presidential election, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of the total US imports. During this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. So when Trump imposes tariffs, he wants to focus on these three countries. He will also use the revenue generated through tariffs to reduce personal income tax.
