AUD/USD softens to near 0.6565 in Monday’s early Asian session.
Trump rekindled trade tensions with new tariffs on the EU and Mexico, weighing on the riskier assets like the Aussie.
Traders brace for China’s Trade Balance data due on Monday ahead of China’s Q2 GDP report.
The AUD/USD pair extends the decline to around 0.6565 during the early Asian session on Monday. The Australian Dollar (AUD) weakens against the Greenback after US President Donald Trump steps up fresh tariff threats. Investors await the release of China’s Trade Balance data due later on Monday ahead of the Gross Domestic Product (GDP) report for the second quarter (Q2).
Trump said Saturday that the United States (US) will impose a 30% tariff on goods from the European Union (EU) and Mexico that will take effect on August 1. These statements followed the announcement of a 35% duty on Canadian imports, beginning August 1. He also proposed a blanket tariff rate of 15%-20% on other trading partners, an increase from the current 10% baseline rate.
Investors remained cautious as the US Federal Reserve (Fed) is widely expected to hold interest rates steady as it waits to see the impact of tariffs on price pressures. This, in turn, could lift the US Dollar (USD) and create a headwind for the pair. Chicago Fed President Austan Goolsbee warned that ongoing trade policy at the hands of Trump's constant tariff threats could hamper the ability of the Fed to deliver rate reductions that both the broader market and Trump himself want to see.
On Tuesday, China’s GDP for the second quarter and Retail Sales reports will be in the spotlight. China's economy is estimated to have slowed down in Q2 to 5.2% YoY from 5.4% in Q1 as trade tensions with the US added to deflationary pressures. On a quarterly basis, the economy is expected to have expanded 1.0% in Q2, slowing from 1.2% in Q1. If the reports show a surprise upside in Chinese GDP data, this could help limit the China-proxy AUD’s losses in the near term, as China is a major trading partner of Australia.
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