Home Daily Commentaries AUD falters despite improved US/China trade relations and uptick across commodity prices

AUD falters despite improved US/China trade relations and uptick across commodity prices

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.

| Tuesday 13 May, 2025

Daily Currency Update

The Australian dollar retreated through trade on Monday, giving up nearly 1%, amid broad-based US dollar strength. President Donald Trump repealed tariffs imposed against China, rolling back taxes on exports to the US, after a series of positive and robust trade talks at the weekend. Trump announced China would be afforded a 90-day reprieve, removing suffocating tariffs, with the tax on Chinese exports reduced to just 30%, down from 145%. China followed suit, paring back its tariff agenda and reducing its tariff rate to 10%.

Equities and risk assets rallied sharply while the US dollar lurched upward following a surge in US yields and a paring of Fed rate cut expectations. Having slipped below US$0.64, the AUD touched intraday lows at US$0.6365 before settling nearer US$0.6380.

Our attention remains on the tariff agenda, risk sentiment and US CPI data. With tariff adjustments much larger than expected, there is a sense that China outplayed the US, with the prospect of further improvements in US/China trade relations potentially adding further support to the risk-on narrative, elevating commodities, stocks and risk assets. While the adjustments are temporary, improved trade relations ultimately, should help add a floor beneath the AUD and could prompt a break back toward US$0.65.

Key Movers

The US dollar advanced through trade on Monday, buoyed by improved US/China trade relations. The DXY index surged 1.5%, pushing back above 102, as the euro and safe-haven currencies underperformed. The euro fell 1.5% below 1.11 to 1.1085, as the yen and Swiss franc underperformed, down 2%. The USD pushed above 148 against the yen, marking session highs at 148.30.

The abrupt adjustment in the US tariff agenda has helped alleviate fears for global growth, as the negative impact on the global economy is reduced. With inflation fears connected to higher tariffs fading, central bank policy expectations have shifted sharply over the last 24 hours. Fed rate cut expectations are down 10 basis points amid a short-end selloff.

Our attention today remains with the US trade narrative while US CPI data headlines the macro ticket. The data should show the early impacts of tariffs, and we expect an uptick in price pressures through the coming months.

Expected Ranges

  • AUD/USD: 0.6350 - 0.6450 ▼
  • AUD/EUR: 0.5680 - 0.5750 ▲
  • GBP/AUD: 2.05 - 2.08 ▲
  • AUD/NZD: 1.0830 - 1.0930 ▲
  • AUD/CAD: 0.8850 - 0.8980 ▼

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.