AUD under pressure as US global trade war escalates
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Daily Currency Update
The Australian dollar found support on Monday, recovering losses suffered following President Trump’s promise to proceed with implementing a 25% tariff on Canada and Mexico and issue an additional 10% tax on China imports. Softer-than-anticipated US ISM manufacturing data and a decline in US yields drove the dollar lower against a basket of currencies, allowing the AUD to climb off lows below US$0.62, to trade above US$0.6250 overnight.While finding support against the USD, the AUD underperformed against European currencies. The AUD fell against the euro, slipping below 0.5950 and 0.5940, opening this morning at its lowest level since September 2023. The AUD/GBP marked a new 5-year low, sliding below 0.49, the lowest level since the early days of the Pandemic.
With little of note on today’s macro docket, our attention remains affixed to geopolitical and tariff headlines. As we author today’s commentary, the AUD has gapped lower following comments from President Trump, who doubled down, confirming that tariffs against Canada, Mexico, and China will proceed as planned tomorrow. The AUD remains vulnerable to further tariff headlines as the market has failed to fully price their total impact.
Key Movers
The US dollar fell against a basket of currencies amid softer manufacturing data and a surge in European yields. The ISM manufacturing report showed activity slowed through February, with headline performance sliding closer toward contractionary territory, while key new orders and employment metrics fell sharply and inflation markers climbed to their highest level since mid 2022.Survey participants sighted price pressures and incoming tariffs as sources of uncertainty. The softer print drove US yields lower. In contrast, European yields rallied amid a stronger-than-anticipated euro area CPI print and an expected uptick in defence spending as Europe prepares to fill the gap left by the US after the weekend’s disastrous White House meeting between Presidents Trump and Zelenskyy. The euro and the British pound outperformed, both climbing more than 1%. The euro has moved back toward 1.05, while the GBP is now trading over 1.27.
With little of note on the macro docket, our attention remains on geopolitical and tariff headlines. At the time of writing, President Trump affirmed that Mexico and Canada tariffs will begin tomorrow as planned, with a further 10% tariff imposed on China. We are keenly attuned to China’s response amid reports officials are preparing countermeasures that will include both tariff and non-tariff instruments.
Expected Ranges
- AUD/USD: 0.61 - 0.6300 ▼
- AUD/EUR: 0.5850 - 0.6000 ▼
- GBP/AUD: 2.0280 - 2.0520 ▲
- AUD/NZD: 1.1050 - 1.1150 ▼
- AUD/CAD: 0.8950 - 0.9080 ▲