AUD/USD turns upside down to near 0.6400 after US-China trade truce
- AUD/USD weakens as the US Dollar gains after the US and China agree to lower tariffs.
- The US and China reduced tariffs by 115% for a 90-day period.
- This week, investors will focus on the Aussie employment data for April.
The AUD/USD pair gives back initial gains and turns negative during North American trading hours on Monday. The Aussie pair slides to near 0.6390 as the US Dollar (USD) surges after the United States (US) and China agree to roll back higher import duties imposed after the announcement of reciprocal tariffs by President Donald Trump on the so-called Liberation Day on April 2.
The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, surrenders some of its initial gains after struggling to extend its upside above 101.95. Still, it is over 1% up from its Friday close around 101.50, at the time of writing.
In a scheduled briefing, the US and China announced a 90-day pause in the ongoing tariff war. Both nations reduced tariffs by 115%. Still, the 20% fentanyl levy in import duty on China is intact. However, Washington signaled that constructive discussions are on to resolve the same.
The temporary truce between the US and China is expected to force market experts to revise their global economic outlook. This has led to a sharp rally in equities across the globe. The S&P 500 has opened with robust gains of about 2.6%, indicating a significant increase in the risk appetite of investors.
Considering the strength in the US Dollar, the downside in the Aussie pair is lower as the Australian Dollar (AUD) has also attracted bids on de-escalation in the trade war between the US and China. Given that the Australian economy relies heavily on its exports to China, the Aussie Dollar is outperforming other peers.
Australian Dollar PRICE Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 1.19% | 0.81% | 1.27% | 0.65% | 0.44% | 0.77% | 0.93% | |
| EUR | -1.19% | -0.25% | 0.61% | -0.05% | -0.13% | 0.06% | 0.22% | |
| GBP | -0.81% | 0.25% | 1.04% | 0.20% | 0.13% | 0.23% | 0.47% | |
| JPY | -1.27% | -0.61% | -1.04% | -0.62% | -1.44% | -1.35% | -0.57% | |
| CAD | -0.65% | 0.05% | -0.20% | 0.62% | 0.06% | 0.11% | 0.27% | |
| AUD | -0.44% | 0.13% | -0.13% | 1.44% | -0.06% | 0.09% | 0.32% | |
| NZD | -0.77% | -0.06% | -0.23% | 1.35% | -0.11% | -0.09% | 0.13% | |
| CHF | -0.93% | -0.22% | -0.47% | 0.57% | -0.27% | -0.32% | -0.13% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
Domestically, the AUD will be influenced by the employment data for April, which will be released on Thursday. The labor market data is expected to show that the Unemployment Rate remained steady at 4.1%. The Australian economy is estimated to have added 25K fresh workers, lower than 32.2K in March.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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