Australian dollar may fall due to potential fears about Trump’s tariffs on Chinese goods.
Australian Dollar (AUD) rose on Monday, amid a generally pessimistic outlook fueled by fears over Donald Trump’s proposed tariff rises on Chinese imports, which could affect Australian markets, one of China’s top trading partners. The US markets will be close for the Veteran’s Day bank holiday.
The AUD struggled as China’s newest stimulus measures fell short of investor expectations.
The Australian dollar may also suffer downward pressure from lower-than-expected Chinese Consumer Price Index (CPI) data issued on Saturday. Furthermore, China’s latest Investor expectations for stimulus measures not met, further lowering demand predictions for Australia’s main trading partner and dragging on the Australian dollar.
China launched a 10-trillion-yuan debt package on Friday, aimed at alleviating local government finance difficulties and supporting lagging economic growth. However, the package did not include immediate economic stimulus measures.
Australia’s 10-year government bond yield fell to around 4.6%, mirroring a reduction in US bond yields following the Federal Reserve’s widely expected 25 basis point interest rate cut. Last Monday, the Reserve Bank of Australia (RBA) held the interest rate constant at 4.35%. The central bank stressed that underlying inflation is still too high and is not anticipated to revert to its objective until 2026.
Daily Market Movers: The Australian Dollar facing hurdles because of projected Trump tariffs.
Federal Reserve Bank of Minneapolis President Neel Kashkari noted on Sunday that the US economy has demonstrated extraordinary resilience as the Fed continues to combat inflation. However, Kashkari acknowledged that the Fed is still “not all the way home.” He also stated that the Fed wants to be certain that inflation will fully return to the 2% objective and needs more data before considering another rate cut.
Morgan Stanley classifies the Trump administration’s macroeconomic policies into three categories: tariffs, immigration, and fiscal policy. The research anticipates that tariff measures will be prioritized, with an immediate application of 10% tariffs globally and 60% tariffs on China.
Analysts argue that if Trump’s fiscal plans are When implemented, they may lead to increased investment, expenditure, and labor demand, raising inflation risks. This could push the Fed to tighten monetary policy, potentially strengthening the US dollar and placing more pressure on the Australian Dollar pair.
Trump’s fiscal measures may increase the danger of inflation, prompting the Fed to tighten policy.
Fed Chair Jerome Powell stressed on Thursday that he does not expect Trump’s likely return to the White House to have an impact on the Fed’s near-term policy decisions. “We don’t guess, speculate, or make assumptions about future government policy choices,” Powell said after the bank opted to cut interest rates by 25 basis points to 4.50%-4.75%, as expected.
Fed Chair Jerome Powell also highlighted that the Fed will continue to analyze economic data to decide on the “pace and destination” of future interest rates adjustments, indicating that inflation is progressively dropping toward the Fed’s 2% target.
China’s Consumer Price Index (CPI) climbed 0.3% year on year in October, slightly lower than market expectations and down from 0.4% in September. This is the ninth straight month of consumer price inflation, but the rate is the lowest since June. The CPI fell by 0.3% month on month, greater than the projected 0.1% dip, after a flat reading in September.
On Friday, the preliminary University of Michigan Consumer Sentiment Index jumped to 73.0 in November, up from 70.5 in October and higher than the market’s expectation of 71.0.
The US Department of Labor (DoL) reported on Thursday that initial jobless claims increased to 221,000 for the week ending November 1. This figure corresponded with Initial estimates were higher than the previous week’s revised total of 218,000 (initially reported as 216,000).
