Home Daily Commentaries AUD upswing extended amid hopes for new US/China trade deal

AUD upswing extended amid hopes for new US/China trade deal

Matt Richardson
Written by
Matt Richardson

Matt Richardson

OFXpert

Matt provides expertise in currency risk management to his clients, drawing from his 14 years of experience in foreign exchange.

| Friday 21 February, 2025

Daily Currency Update

The Australian dollar upswing resumed on Thursday amid higher commodity prices, a broadly weaker USD and elevated hopes for a new US/China trade deal. Commodity prices edged higher with Iron ore leading gains up 1.87%, while the Chinese yuan rallied 0.7% following reports President Trump would like to strike a wide reaching deal with President Xi and China, one that is not limited to reciprocal tariffs and extends beyond the trading relationship. The prospect of closer geo-political ties and a tempering in trade tensions helped drag the AUD through resistance to test a break above US$0.64. Having marked intraday highs at US$0.6403, the AUD levelled out through the backend of the overnight session, holding gains to open this morning at US$0.6402. With the AUD on the front foot, domestic employment data helped underpin gains with the January labour force reports highlighting the resiliency of the labour market. While the unemployment rate rose to 4.1%, jobs growth was significantly stronger than expected and the participation rate rose to its highest level on record. The robust print dampened expectation the RBA will issue another rate cut in as soon as May.

Our attentions turn now to a stacked macro docket. Japan CPI data, US manufacturing PMI’s and UK consumer confidence headline the ticket ahead of the German General election this weekend.

Key Movers

The US dollar was broadly weaker on Thursday with the DXY index down 0.7%, amid a dip in yields and improved risk sentiment. In contrast, the Japanese yen let gains among majors, powered by a surge in JGB yields and elevated expectations for a normalisation in Bank of Japan Monetary policy. Ten year JGB yields ended yesterday just short of 1.45%, their highest level in over a decade fuelling JPY gains and forcing the USD back below 150, the first time it has slipped below this handle in 5 months. Our attentions turn now to Japan CPI inflation data for January. We expect today’s report will show headline CPI has jumped to 4%, meaning the Bank of Japan’s adjusted monetary policy rate remains deeply in negative territory and further tightening will be needed through 2025 if inflation pressures are to be curtailed. Yen gains and dollar weakness spilled over into other majors, with the British pound pushing through 1.2650, while the euro made its way back above 1.05.

Our attentions remain affixed to US trade headlines, geopolitical developments and a stacked macro docket. Japan CPI data, US manufacturing PMI’s and UK consumer confidence headline the ticket ahead of the German General election this weekend.

Expected Ranges

  • AUD/USD: 0.6280 - 0.6450 ▲
  • AUD/EUR: 0.6020 - 0.6120 ▲
  • GBP/AUD: 1.9600 - 1.9900 ▼
  • AUD/NZD: 1.0980 - 1.1120 ▼
  • AUD/CAD: 0.9000 - 0.9100 ▲

Written by

Matt Richardson

OFXpert

As a Senior Corporate Client Manager, Matt provides expertise in currency risk management to his clients, drawing from his 14 years of experience in foreign exchange. Matt has clients who he has been working with for over a decade, a testament to his knowledge and dedication in the field. Matt is also a regular contributor on Ausbiz, offering clear and precise updates on currency market trends, showcasing his ability to interpret complex financial data into actionable insights.

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