AUD/USD drifts higher to near 0.6370 in Monday's early Asian session, adding 0.25% on the day.
China vowed to adopt more targeted measures to stimulate consumer spending, supporting the Aussie.
Renewed trade tensions could boost the US dollar and cap the upside for the pair.
The AUD/USD pair edges higher to near 0.6370 during the early Asian session on Monday. The Australian Dollar (AUD) attracts some buyers as the Chinese government announced rural revitalisation plans in its annual policy blueprint.
According to the State Council's annual rural policy blueprint, China will intensify rural reforms to revitalize the agriculture sector and strengthen food security in the face of US tariffs, an economic slowdown, and climate change. Additionally, Premier Li Qiang said on Thursday that China will direct more efforts to boosting consumption and lifting people's livelihoods. Any positive development surrounding China's stimulus plans could lift the China-proxy Australian Dollar as China is a major trading partner to Australia.
The downbeat US economic data drags the Greenback lower and creates a tailwind for AUD/USD. Data released by S&P Global on Friday showed that the Composite PMI declined to 50.4 in February versus 52.7 prior. Meanwhile, the Manufacturing PMI climbed from 51.2 in February to 51.6 in January, beating the estimation of 51.5. Finally, the Services PMI dropped from 52.9 in January to 49.7 in February, weaker than the 53.0 expected.
Investors will keep an eye on inflation data this week and closely monitor the tariff headlines from US President Donald Trump. Any signs of uncertainty and escalating trade tensions could boost the US Dollar (USD), a safe-haven currency.
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
Source: Fxstreet
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