AUD/USD steady amid US-China tariff relief, US budget concerns

• The Australian Dollar holds around 0.6480, supported by signs of easing tensions between Washington and Beijing.
• China plans to suspend some tariffs on US agricultural goods starting November 10.
• The US budget impasse weighs on the US Dollar, while markets reassess the likelihood of a Fed rate cut in December.

AUD/USD holds steady on Wednesday, trading around 0.6480 at the time of writing, virtually unchanged on the day. Sentiment remains positive on the Australian Dollar (AUD) after China’s Ministry of Finance announced that it will suspend, from November 10, certain tariffs on US agricultural products. Beijing stated that the 24% tariffs on several US goods will be lifted for one year, while the 10% tariffs will remain in place.

This decision has boosted optimism about US-China trade relations and is supporting the Aussie, which is highly sensitive to developments in the Chinese economy. However, recent data from China’s services sector show a slight slowdown, with the RatingDog Services Purchasing Managers’ Index (PMI) falling to 52.6 in October from 52.9 in September, matching market expectations.

In Australia, the S&P Global Services PMI rose slightly to 52.5, extending its expansion streak to a 21st consecutive month, while the Composite PMI edged down to 52.1. These figures confirm continued resilience in economic activity, even as the Reserve Bank of Australia (RBA) remains cautious after keeping its Official Cash Rate at 3.6% on Tuesday. Governor Michele Bullock noted that core inflation remains above 3%, warranting a “patient and watchful” approach.

In the United States (US), the focus remains on the ongoing government shutdown, now entering its sixth week. The Senate’s repeated failure to pass a temporary funding bill raises the prospect of the longest federal funding lapse in US history. This paralysis weighs on investor sentiment and keeps the US Dollar Index (DXY) around 100.20, while markets have trimmed expectations for a December rate cut to 69%, down from 90% a week ago, according to the CME FedWatch tool.

Labor market data offered a modest surprise, as the ADP report showed private sector employment rising by 42,000 in October, far exceeding forecasts of 25,000, following a revised drop of 29,000 in September. According to ADP’s chief economist Nela Richardson, private hiring resumed modestly, while pay growth has remained stable for more than a year.