The AUD/USD pair jumped above 0.6200, driven by a decline in the US Dollar's risk premium following Trump's tariff postponement on Canada and Mexico. Despite this, the ongoing trade war concerns with China, as China retaliates with its own tariffs, continue to weigh on the Australian Dollar's outlook.
The AUD/USD currency pair experienced a notable rebound, surging above the 0.6200 psychological level in the North American session on Tuesday. This resurgence came as the US Dollar shed its intraday gains following US President Donald Trump's decision to postpone the implementation of 25% tariffs on Canada and Mexico for 30 days.
This move, perceived as a de-escalation of trade tensions, led to a decline in the US Dollar's risk premium, as the Greenback is often considered a safe-haven asset during periods of economic uncertainty.The US Dollar Index (DXY), which measures the US Dollar's strength against a basket of six major currencies, dipped to near 108.50 after briefly recovering to around 109.00. However, the impact of Trump's decision to impose 10% tariffs on Chinese goods came into effect, fueling ongoing concerns about a potential trade war. In retaliation, China announced its own tariffs on US products, scheduled for implementation in February. This development cast a shadow on the Australian Dollar's outlook, as the currency is closely tied to China's economic performance.Investors interpreted the delay in China's tariff implementation as a sign that negotiations between the two economic giants are ongoing, potentially mitigating the immediate impact on global trade. Looking ahead, the crucial US Nonfarm Payrolls (NFP) data for January, scheduled for release on Friday, is expected to significantly influence speculation surrounding the Federal Reserve's (Fed) monetary policy guidance. The NFP report, a key indicator of the US labor market health, could provide further clues about the Fed's stance on interest rates, potentially impacting both the US Dollar and the broader global financial markets
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