The Australian Dollar (AUD) holds gains against the US Dollar (USD) on Thursday. The AUD/USD pair edges higher despite disappointing Australian Private Capital Expenditure data, which unexpectedly contracted by 0.2% quarter-on-quarter in Q4 2024, missing market forecasts of 0.8% growth. This follows an upwardly revised 1.6% expansion in the previous quarter.

Reserve Bank of Australia Deputy Governor Andrew Hauser said on Thursday that he expects more positive news on inflation but emphasized the importance of seeing this progress materialize first. He noted that the tightness in Australia's labor market remains a challenge for controlling inflation.
The AUD faced headwinds on Wednesday after Australia's monthly Consumer Price Index (CPI) rose 2.5% year-over-year in January, matching December's increase but falling short of the market's 2.6% growth forecast.

The AUD/USD pair remains under pressure amid rising risk sentiment following US President Donald Trump's statement earlier this week that sweeping US tariffs on imports from Canada and Mexico "will go forward" after the current month-long delay expires next week. Adding to the pressure, the Trump administration plans to tighten chip export controls on China, one of Australia's key trading partners.

Australian Dollar could depreciate due to increased risk aversion
The US Dollar Index (DXY), which measures the USD against six major currencies, gains ground as traders assess the strength of the economy and tariff outlook. The DXY extends its gains to near 106.50 at the time of writing.
Federal Reserve Bank of Atlanta President Raphael Bostic said late Wednesday that the Fed should hold interest rates where they are, at a level that continues to put downward pressure on inflation, per Bloomberg.
US Commerce Secretary Howard Lutnick said late Wednesday that April 3 serves as the baseline for reciprocal tariff data. Lutnick also stated that he would not allow Chinese vehicles in the US, citing China as his major concern.
US Treasury Secretary Scott Bessent expressed his commitment to working with Congress to make President Trump's tax cuts permanent.
The White House said late Wednesday that US President Donald Trump issued an executive order aimed at implementing the Department of Government Efficiency's (DOGE) cost-cutting drive, per Reuters. The executive order requires agencies to justify spending, limit travel, and identify surplus federal properties that can be sold.
President Trump signed a memorandum on Friday instructing the Committee on Foreign Investment in the United States (CFIUS) to limit Chinese investments in strategic sectors. Reuters cited a White House official saying that the national security memorandum seeks to encourage foreign investment while safeguarding US national security interests from potential threats posed by foreign adversaries like China.
The People's Bank of China (PBOC) injected CNY300 billion on Tuesday via the one-year Medium-term Lending Facility (MLF), maintaining the rate at 2%. Additionally, the PBOC injected CNY318.5 billion through seven-day reverse repos at 1.50%, consistent with the prior rate.
The Reserve Bank of Australia (RBA) lowered its Official Cash Rate (OCR) by 25 basis points to 4.10% last week—the first rate cut in four years. Reserve Bank of Australia (RBA) Governor Michele Bullock acknowledged the impact of high interest rates but cautioned that it was too soon to declare victory over inflation. She also emphasized the labor market's strength and clarified that future rate cuts are not guaranteed, despite market expectations.

Source: Fxstreet