The Australian Dollar (AUD) received a boost on Tuesday as copper futures hit a new record high on the COMEX exchange, benefiting from Australia’s role as a leading copper exporter. However, the currency faced downward pressure against the US Dollar (USD) after the release of the Monthly Consumer Price Index (CPI), which showed a 2.4% year-over-year increase in February, slightly lower than January’s 2.5% rise and market expectations.
US Tariff Concerns Fuel Copper Prices and AUD Support
President Donald Trump’s potential move to accelerate the implementation of tariffs on US copper imports has also contributed to the surge in copper prices. While the Commerce Department was initially given until February 2025 to investigate the matter, the timeline may now be shortened, possibly leading to tariffs being imposed within weeks. This news has provided support to the AUD, given Australia’s strong trade ties with copper exports.
Australian Economic Outlook and Budget Announcement
On Tuesday, Australian Treasurer Jim Chalmers presented the 2025/26 budget, which includes A$17.1 billion in tax cuts across two rounds, aimed at stimulating economic growth and bolstering political support. The budget forecasted a deficit of A$27.6 billion for 2024-25 and A$42.1 billion for 2025-26. GDP growth is projected at 2.25% in FY2026 and 2.5% in FY2027.
RBA’s Cautious Approach and China’s Stimulus Efforts
The AUD found some support as investors expect the Reserve Bank of Australia (RBA) to hold interest rates steady in its upcoming meeting, following a 25 basis point rate cut in February. RBA Assistant Governor Sarah Hunter reaffirmed the central bank’s cautious stance, especially amid uncertainties surrounding US monetary policy. Meanwhile, China’s proposed economic stimulus, aimed at boosting consumption and reviving confidence, could further support Australia’s trade outlook.
US Dollar Gaining Strength Amid Global Caution
The US Dollar Index (DXY) has retraced recent losses and is trading around 104.30, supported by rising market caution ahead of Trump’s tariff announcement scheduled for April 2. The specifics of the tariffs remain unclear, with potential exemptions for certain countries, including Canada, although no details have been confirmed. This uncertainty, combined with positive economic data, is lending support to the US Dollar.
US Economic Data and Fed Policy Outlook
On the economic front, the US Composite PMI for March rose to 53.5, indicating robust growth, while the Services PMI surged to a three-month high of 54.3. However, the Manufacturing PMI dropped unexpectedly, highlighting some economic challenges. Federal Reserve officials have indicated that interest rate policy remains restrictive, though they also acknowledged slower progress toward the 2% inflation target.
AUD/USD Technical Outlook
The AUD/USD pair is trading near 0.6280 on Wednesday, showing a bearish bias as it consolidates within a descending channel. The 14-day Relative Strength Index (RSI) is slightly below 50, indicating continued downward momentum. Support levels are located near 0.6210 and the seven-week low of 0.6187, while resistance is positioned at the nine-day Exponential Moving Average (EMA) around 0.6306. A breakout above this level could signal a shift in momentum, with the next target at 0.6391.
