The Australian Dollar (AUD) is experiencing downward pressure following the implementation of reciprocal tariffs on Wednesday. The AUD’s vulnerability is heightened by the United States’ imposition of a 104% tariff on selected Chinese imports. Concurrently, the US Dollar (USD) may find support as elevated 10-year Treasury yields indicate increased investor demand.
Despite an initial recovery against the USD, spurred by comments from US President Trump suggesting a willingness to engage in trade negotiations, the AUD remains susceptible to market volatility. The US has implemented an additional 50% tariff on Chinese imports, impacting Australia given its significant economic relationship with China.
China has condemned the US actions, asserting its intent to protect its economic interests. Australia’s economic outlook remains uncertain, characterized by subdued business and consumer confidence. This has reinforced expectations of a more accommodative monetary policy from the Reserve Bank of Australia (RBA), with market forecasts anticipating up to 100 basis points in rate cuts throughout the year, commencing potentially in May and continuing in July and August.
