The Australian Dollar (AUD) showcased a notable increase of 0.7% quarter-on-quarter in the fourth quarter of 2024, although it fell short of the anticipated 0.8% rise. On Wednesday, the AUD/USD pair hovered around 0.6340, trading within an ascending channel pattern indicative of a bullish market bias. This movement follows the Reserve Bank of Australia's (RBA) decision to cut its Official Cash Rate (OCR) by 25 basis points to 4.10% on Tuesday, marking the first rate cut in four years.
RBA Governor Michele Bullock highlighted that the higher interest rates had performed as expected, decelerating economic activity and helping to rein in inflation. Despite this, the Australian Dollar faced challenges amid rising risk aversion driven by new tariff threats from US President Donald Trump, making it the weakest against the New Zealand Dollar. The AUD/USD pair managed to recover its daily losses against the US Dollar on Wednesday, trading within the mid-0.6300s range.
The potential for the AUD/USD pair to test the upper boundary of the ascending channel aligns with the key psychological resistance at 0.6400. This outlook is supported by the 14-day Relative Strength Index (RSI), which remains above 50, reinforcing a positive perspective for the pair. However, the Australian Dollar's appreciation came despite fresh tariff threats from President Trump, who announced potential tariffs of approximately 25% on foreign cars alongside higher duties on semiconductor chips and drugs.
Adding to the complex financial landscape, the US Dollar lost ground as Treasury yields depreciated, despite hawkish comments from Federal Reserve officials. Compounding this was a report from the US Census Bureau indicating a 0.9% decline in Retail Sales for January, following a revised increase of 0.7% in December.
Amid this backdrop, President Trump's tariff remarks contributed to global market uncertainty. Late Tuesday, he suggested imposing significant tariffs on foreign cars and raised duties on semiconductor chips and drugs, according to Bloomberg. These developments could have far-reaching implications for international trade relations and economic stability.
Concurrently, across the Tasman Sea, the Reserve Bank of New Zealand (RBNZ) is expected to cut its interest rate by 50 basis points to 3.75% in February. Future rate cuts also weigh on the New Zealand Dollar before it rebounded following RBNZ Governor Adrian Orr's press conference. The Governor provided assurances that helped stabilize the Kiwi currency amid economic pressures.