The AUD/USD tumbles to near 0.6280 as the US Dollar outperforms on the Trump administration's tariff agenda. The pair faced sharp selling pressure on Thursday as renewed fears of a global economic slowdown triggered a flight to the US Dollar.
Investors largely ignored softer US CPI and PPI data for February, instead focusing on US President Donald Trump's aggressive trade stance. His renewed commitment to "America First" policies stoked fears of retaliatory measures, weighing on risk-sensitive assets like the Australian Dollar.
Australian Dollar under pressure as trade fears escalate
The US Dollar Index (DXY) rebounded sharply, reaching 104.00 after recovering from a four-month low of 103.20. The Greenback gained as traders turned to safe-haven assets amid heightened concerns over trade policy.
Trump reiterated his protectionist stance, stating that the US does not have "Free Trade" but "Stupid Trade" in a Truth Social post. His comments reinforced expectations of further tariffs on key trading partners.
New tariffs on European imports further rattled markets. Trump confirmed retaliatory duties on 26 billion Euros worth of Eurozone goods after the EU imposed countermeasures against the 25% universal import duty the US placed on steel and aluminum.
US inflation data was softer than expected but failed to weaken the US Dollar. The Producer Price Index (PPI) fell to 0.0% in February, well below the 0.3% estimate, while core PPI contracted by 0.1%. Despite weak inflation figures, markets focused on rising geopolitical and trade risks.
The Australian Dollar struggled amid deteriorating risk sentiment. The currency, which closely reflects Chinese economic performance, faced headwinds as the US maintained 20% tariffs on Chinese imports, raising fears of a further slowdown in Australia's key trading partner.
Markets are also monitoring diplomatic developments as US officials visit Russia to discuss a potential ceasefire agreement with Ukraine. However, geopolitical tensions remain elevated, adding further support to the US Dollar.
Looking ahead, traders will closely watch Australia's labor market report, due March 20, for insights into the Reserve Bank of Australia's (RBA) potential policy direction.
Source; Fxstreet
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