The Australian dollar (AUD) weakened against the US dollar (USD) as US President Trump's proposed tariffs on Colombia fueled trade war anxieties and risk aversion. Investors are also awaiting the Federal Reserve's (Fed) decision on interest rates and Australia's fourth-quarter Consumer Price Index (CPI) for further direction.
The Australian dollar (AUD) fell 0.80% to 0.6245 on Tuesday, testing the 0.6250 support level. This decline coincided with heightened market anxiety fuelled by US President Trump 's proposed incremental tariffs on Colombia . Investors perceive this plan as a tactic to gain leverage in potential trade renegotiations, driving demand for the safe-haven US dollar.
Sentiment worsened further after China's DeepSeek demonstrated affordable AI success, triggering a tech sector shakeout and amplifying the USD's safe-haven appeal.The Federal Reserve (Fed) is widely anticipated to maintain its benchmark interest rate at 4.25%-4.50% on Wednesday. However, markets remain vigilant regarding the central bank's policy stance, especially in light of Trump's calls for swift rate cuts. Meanwhile, the AUD grapples with persistent speculation of an easing by the Reserve Bank of Australia (RBA) and a moderate recovery of the US dollar amidst deepening risk aversion. Key economic data releases will be closely watched. Australia's fourth-quarter Consumer Price Index (CPI) is expected to show subdued inflation, likely bolstering bets on an RBA rate cut in February. A weaker-than-expected figure could solidify expectations of the RBA unwinding its restrictive policy. Domestically, the RBA remains prepared for a potential February rate cut if inflation remains below target and the economy fails to gain momentum. Technical indicators for AUD/USD are mixed. The pair declined to 0.6245 on Tuesday, trading within a tight range of 0.6230-0.6300. The Moving Average Convergence Divergence (MACD) histogram displays rising green bars, suggesting underlying bullish pressure. However, the Relative Strength Index (RSI) stands at 49 in negative territory, indicating a lack of conviction among traders. This divergence reflects market uncertainty as investors await crucial data releases (the Fed's policy decision and Australia's CPI) for clearer direction before making more aggressive moves.The renewed tensions between the US and China due to Trump's return to office have reignited concerns about a trade war. Trump's pledge to impose 60% tariffs on China if re-elected has triggered market volatility and raised fears of a global economic slowdown.
AUD/USD Australian Dollar US Dollar Trade War Trump Colombia Federal Reserve Interest Rates CPI Inflation Risk Aversion
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