Aussie dollar weakens as USD rises on renewed U.S.–China trade optimism
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Daily Currency Update
The Australian dollar (AUD) retreated against the U.S. dollar (USD) on Thursday, with the AUD/USD pair slipping around 0.40% to trade near 0.6552 at the time of writing. The weakness in the Aussie comes as the U.S. dollar finds renewed strength, supported by optimism following a breakthrough meeting between U.S. President Donald Trump and Chinese President Xi Jinping on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit in South Korea. According to official statements, both leaders agreed to a one-year trade truce aimed at stabilising economic relations between the world’s two largest economies. The deal includes a reduction in U.S. tariffs on Chinese imports, from 57% to 47%, alongside China’s commitment to resume U.S. soybean purchases and to allow the unrestricted export of rare earth materials to the United States. These measures have eased fears of renewed trade escalation and restored some confidence in the global growth outlook. Market participants welcomed the diplomatic progress, interpreting it as a positive sign for global trade and manufacturing activity. Meanwhile, the Australian dollar—often viewed as a proxy for Chinese economic performance and global risk sentiment—lost ground amid the USD rebound. Domestically, the AUD also faced headwinds from weaker commodity prices and soft retail sales data, which reinforced expectations that the Reserve Bank of Australia (RBA) will maintain a cautious stance on monetary policy in the near term. Investors are awaiting next week’s RBA policy statement for further guidance on interest rate projections and the Bank’s assessment of external risks. Looking ahead, the near-term direction of AUD/USD will likely hinge on the sustainability of the U.S.–China trade truce and upcoming U.S. economic indicators, including Friday’s Nonfarm Payrolls (NFP) report. A stronger-than-expected NFP print could bolster the USD further, putting additional pressure on the Aussie. Conversely, any signs of policy backtracking or renewed geopolitical uncertainty could limit the dollar’s gains and offer some support to risk-sensitive currencies such as the AUD. At present levels, technical analysts note that AUD/USD faces immediate support near 0.6530, with resistance seen around 0.6600. A decisive break below support could open the door toward the 0.6500 psychological threshold, while a rebound above resistance might signal a short-term recovery in the pair.Key Movers
The U.S. dollar (USD) strengthened for a second consecutive session on Thursday, supported by hawkish remarks from Federal Reserve Chairman Jerome Powell and growing uncertainty surrounding the next phase of the Sino–U.S. trade deal. The U.S. Dollar Index (DXY), which measures the Greenback’s performance against a basket of major currencies, climbed to around 99.25 during the European session, extending Wednesday’s advance. The dollar’s renewed strength followed a volatile reaction to the Federal Reserve’s policy decision late Wednesday. As widely expected, the Fed delivered a 25 basis-point rate cut, bringing the target range for the federal funds rate to 3.75%–4.00%, and formally announced the end of its quantitative tightening program. Initially, the market response was muted, as the move had been largely priced in. However, sentiment shifted sharply following Powell’s post-meeting press conference. Powell emphasised that while the latest rate reduction was designed to support the economy amid global uncertainty, policymakers are not on a pre-set course for further easing. He cautioned that a December rate cut is “far from a foregone conclusion,” citing mixed economic signals. Strong labor market data continue to contrast with sluggish inflation and uneven business investment, leaving the Federal Open Market Committee (FOMC) divided on the appropriate path forward. The Chairman’s comments were widely interpreted as a hawkish pivot, suggesting that the Fed may pause to assess the impact of previous rate cuts before taking additional action. Investors reacted by trimming expectations for further easing in 2025, prompting a sharp uptick in U.S. Treasury yields and lending renewed support to the dollar. Meanwhile, market participants are also weighing the implications of the Sino–U.S. trade accord, announced earlier this week following talks between Presidents Donald Trump and Xi Jinping on the sidelines of the APEC summit in South Korea. While the agreement included tariff reductions and renewed Chinese commitments to purchase U.S. agricultural goods, analysts remain cautious about its long-term durability and the enforcement mechanisms in place. Risk sentiment remains fragile as traders look for more concrete details on implementation. The combination of Fed caution and lingering trade uncertainty has favoured the Greenback as investors rotate into safer assets. Looking ahead, the dollar’s near-term trajectory will likely hinge on incoming U.S. data, particularly Friday’s Nonfarm Payrolls (NFP) report and next week’s inflation figures. A stronger-than-expected labor print could reinforce the Fed’s hawkish tone and extend the dollar’s gains, while any signs of weakness might revive expectations for further policy easing in early 2025.Expected Ranges
- AUD/USD: 0.6450 - 0.6650 ▼
- AUD/EUR: 0.5550 - 0.5750 ▼
- GBP/AUD: 1.9950 - 2.0150 ▼
- AUD/NZD: 1.1300 - 1.1500 ▲
- AUD/CAD: 0.9050 - 0.9250 ▼