Australian Dollar gains strength as US tariff exemption fuels global risk appetite

• The Australian Dollar advanced after Trump exempted key technology products — including some from China — from his new “reciprocal” tariffs.
• RBA Meeting Minutes indicated uncertainty over the timing of the next interest rate move.
• The US Dollar is trying to steady as investors weigh rising stagflation concerns.

The Australian Dollar (AUD) strengthens for a fifth straight session against the US Dollar (USD) on Tuesday. The AUD/USD pair continued to gain momentum after US President Donald Trump exempted key technology products from his new “reciprocal” tariffs, lifting global risk sentiment.

The exemptions cover items largely produced in China—such as smartphones, computers, semiconductors, solar cells, and flat-panel displays—offering a boost to the AUD, as China remains Australia’s largest trading partner and a major consumer of its commodities. 

Minutes from the Reserve Bank of Australia's (RBA) March 31–April 1 meeting suggested that the timing of the next interest rate move remains uncertain. While the Board noted that the May meeting would be an appropriate time to reassess policy, it emphasized that no decision had been predetermined.

Members acknowledged that global uncertainty, particularly surrounding US tariffs, could significantly affect the outlook. The Board also highlighted both upside and downside risks to the Australian economy and inflation. 

Australia’s 10-year government bond yield slipped to approximately 4.33%. While the Reserve Bank of Australia (RBA) kept interest rates unchanged this month, it struck a more dovish tone on future cuts, pointing to easing core inflation. Markets are currently factoring in a 25-basis point cut in May and anticipate around 120 basis points of total easing over the course of the year.

Australian Dollar appreciates due to eroding investor confidence in US assets

• The US Dollar Index (DXY), which measures the USD against a basket of six major currencies, inched higher after hitting its lowest level since 2022. The DXY is trading around 99.90 and attempting to stabilize as investors respond to growing signs of stagflation risks.
• Atlanta Fed President Raphael Bostic remarked during early Tuesday’s market session that the US central bank still has a long road ahead to achieve its 2% inflation target, casting doubt on market expectations for additional interest rate cuts.
• The University of Michigan’s sentiment index dropped to 50.8 in April, while one-year inflation expectations surged to 6.7%. The US Producer Price Index (PPI) rose 2.7% year-over-year in March, down from 3.2% in February, with the core rate easing to 3.3%. Jobless claims ticked up to 223,000, although continuing claims declined to 1.85 million—pointing to a mixed picture in the labor market.
• On Sunday, Minneapolis Federal Reserve President Neel Kashkari said on CBS' Face the Nation that the economic fallout from Trump’s trade war would largely depend on how quickly trade uncertainties are resolved. “This is the biggest hit to confidence that I can recall in the 10 years I’ve been at the Fed—except for March 2020 when COVID first hit,” Kashkari remarked.
• Escalating trade tensions between the US and China have revived concerns about a potential global economic slowdown. On Friday, China’s Ministry of Finance announced a sharp increase in tariffs on US goods, raising them from 84% to 125%. This action came in response to President Trump’s earlier move to raise tariffs on Chinese imports to 145%.
• The US Consumer Price Index (CPI) inflation eased to 2.4% year-over-year in March, down from 2.8% in February and below the market forecast of 2.6%. Core CPI, which excludes food and energy prices, rose 2.8% annually, compared to 3.1% previously and missing the 3.0% estimate. On a monthly basis, headline CPI dipped by 0.1%, while core CPI edged up by 0.1%.
• Minutes from the latest Federal Open Market Committee (FOMC) Meeting suggested that policymakers are nearly unanimous in recognizing the dual challenge of rising inflation and slowing growth, cautioning that the Federal Reserve faces “difficult tradeoffs” in the months ahead.
• China’s Trade Balance for March, measured in Chinese Yuan (CNY), recorded a substantial increase to CNY 736.72 billion, up sharply from CNY 122 billion in the previous month. In US Dollar (USD) terms, the trade surplus also exceeded expectations, coming in at $102.6 billion—well above the forecast of $77 billion, though lower than the prior $170.51 billion.
• China’s Exports rose 13.5% year-over-year in March, accelerating from 3.4% in February, while imports declined 3.5% YoY, a smaller drop compared to the 7.3% contraction previously reported.
• The General Administration of Customs of China acknowledged the challenges facing the country’s exports, calling the current external environment “complex and severe.” Despite this, officials expressed confidence, stating that “the sky will not fall.” They reported a solid start to the year, with foreign trade showing growth in both volume and quality. The agency also emphasized China’s commitment to enforcing all measures necessary to counter US actions and to uphold its national sovereignty and security.
• The People's Bank of China (PBoC) is expected to implement further monetary easing in Q2 2025. This includes a potential 15 basis point cut to the loan prime rate (LPR) and a minimum 25 basis point reduction in the reserve requirement ratio (RRR). According to Citi analysts, cited in a Reuters report, there’s an increasing likelihood that domestic stimulus measures will be accelerated in response to mounting external pressures.

Australian Dollar rises to near 0.6350 due to persistent bullish bias 

The AUD/USD pair is trading near the 0.6340 mark on Tuesday, with technical indicators on the daily chart pointing to a bullish bias. The pair remains above both the nine-day and 50-day Exponential Moving Averages (EMAs), while the 14-day Relative Strength Index (RSI) has moved above the neutral 50 level, reinforcing the positive momentum.

On the upside, the AUD/USD pair may aim for psychological resistance at 0.6400, followed by the four-month high of 0.6408. 

Immediate support is seen at the 50-day EMA around 0.6270, with further support at the nine-day EMA near 0.6240. A decisive break below these levels could undermine the short-term bullish structure, opening the door to further downside toward the 0.5914 zone—its lowest since March 2020—and the key psychological level of 0.5900.

AUD/USD: Daily Chart