- The Australian Dollar declined as US President Donald Trump set tariffs against China, Canada, and Mexico.
- China’s Caixin Manufacturing Purchasing Managers’ Index fell to 50.1 in January, down from 50.5 in December.
- The US plans to impose a 25% tariff on Canadian and Mexican goods, while China will face a 10% tariff.
The Australian Dollar (AUD) extends its losing streak against the US Dollar (USD) for the sixth consecutive session on Monday. The AUD/USD pair dropped around 2% amid risk-off sentiment following US President Donald Trump’s decision to impose import tariffs on China, one of Australia’s key trading partners.
On Saturday, the US announced plans to implement 25% tariffs on Canadian and Mexican goods, while Chinese exports would face a 10% tariff, according to Bloomberg. These tariffs, set to take effect on Tuesday, will remain in place until the fentanyl overdose crisis is “resolved.”
In response, Canada, Mexico, and China have vowed to retaliate against the broad trade restrictions. China’s foreign ministry warned that the tariffs would inevitably impact future cooperation on drug control.
Meanwhile, Australia’s Retail Sales declined by 0.1% month-on-month in December 2024, marking the first drop in nine months. Although the decline was less severe than the anticipated 0.7% contraction, it highlights weakening consumer spending, increasing speculation that the Reserve Bank of Australia (RBA) may consider a rate cut in February.
China’s Caixin Manufacturing Purchasing Managers’ Index (PMI) declined to 50.1 in January, down from 50.5 in December. The reading fell short of market expectations, which had anticipated a steady 50.5.
Australian Dollar loses ground as Trump initiates trade war
- The US Dollar Index (DXY), which measures the US Dollar’s value against six major currencies, rises for the fifth successive day and trades above 109.50 at the time of writing. ISM Manufacturing PMI for January will be eyed later on Monday.
- The US Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation gauge, rose 0.3% MoM in December, up from 0.1% in November. On an annual basis, PCE inflation accelerated to 2.6% from the previous 2.4%, while core PCE, which excludes food and energy, remained steady at 2.8% YoY for the third straight month.
- The Department of Commerce reported that Gross Domestic Product Annualized (Q4) fell to 2.3% from 3.1%, missing expectations of 2.6%. Additionally, Initial Jobless Claims for the week ending January 24 came in at 207K, below forecasts of 220K but an improvement from the previous week’s 223K.
- Fed Chair Jerome Powell emphasized during the post-meeting press conference that the central bank would need to see “real progress on inflation or some weakness in the labor market” before considering any further adjustments to monetary policy.
- US Treasury Secretary Scott Bessent warned Key Square Capital Management partners a year ago that “tariffs are inflationary and would strengthen the US Dollar—hardly a good starting point for a US industrial renaissance.” However, according to the Financial Times (FT), Bessent last week advocated for new universal tariffs on US imports, proposing an initial 2.5% rate that would gradually increase.
- President Trump announced his threat on X (formerly Twitter) to levy 100% tariffs on BRICS nations if they attempt to introduce an alternative currency to challenge the US dollar in international trade.
- Australia’s Retail Sales increased by 4.6% year-over-year compared to December 2023. On a seasonally adjusted basis, sales rose 1.0% QoQ in the December quarter of 2024.
- ANZ, CBA, Westpac, and now National Australia Bank (NAB) all anticipate a 25 basis point (bps) rate cut from the Reserve Bank of Australia (RBA) in February. Previously, the NAB had forecasted a rate cut in May but has now moved its projection forward to the February RBA meeting.
- The Reserve Bank of Australia released its January 2025 Bulletin, featuring a detailed analysis of how monetary policy changes influence interest rates in the economy and how fluctuations in interest rates impact economic activity and inflation.
Australian Dollar breaks below descending channel’s lower boundary
AUD/USD hovers around 0.6130 on Monday, trading below the descending channel pattern on the daily chart, signaling a strengthening bearish bias. The 14-day Relative Strength Index (RSI) has dropped near the 30 mark, reinforcing the ongoing downside momentum.
On the downside, the AUD/USD pair could test the psychological support level of 0.6131, last seen in April 2020.
Alternatively, if the pair attempts a rebound, it may re-enter the descending channel and target the upper boundary, which aligns with the nine-day Exponential Moving Average (EMA) at 0.6217.
AUD/USD: Daily Chart
Australian Dollar PRICE Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 1.43% | 1.14% | 0.42% | 0.58% | 1.89% | 1.27% | 0.14% | |
| EUR | -1.43% | 0.11% | 0.32% | 0.46% | 0.92% | 1.14% | 0.02% | |
| GBP | -1.14% | -0.11% | -0.88% | 0.34% | 0.81% | 1.03% | -0.09% | |
| JPY | -0.42% | -0.32% | 0.88% | 0.13% | 1.59% | 1.74% | 0.34% | |
| CAD | -0.58% | -0.46% | -0.34% | -0.13% | 0.20% | 0.68% | -0.44% | |
| AUD | -1.89% | -0.92% | -0.81% | -1.59% | -0.20% | 0.22% | -0.89% | |
| NZD | -1.27% | -1.14% | -1.03% | -1.74% | -0.68% | -0.22% | -1.10% | |
| CHF | -0.14% | -0.02% | 0.09% | -0.34% | 0.44% | 0.89% | 1.10% |
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).
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
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