The AUD/USD pair surged higher on Monday, benefiting from improved risk sentiment following China's monetary stimulus measures. The Australian Dollar strengthened broadly as investors reacted positively to the prospect of increased liquidity in the Chinese economy. Meanwhile, traders are turning their attention to upcoming events, including the Federal Reserve's (Fed) policy decision and Australia's employment data for February, which could provide further direction for AUD/USD.
Australian Dollar strengthens as risk sentiment improves
The Australian Dollar extended Friday's rally, with AUD/USD climbing into the upper 0.6300s, marking a three-week high. The pair's gains unfolded alongside a weaker US Dollar Index (DXY), which remained near multi-month lows around 103.30 due to persistent trade tensions and falling Treasury yields.
China's fresh monetary stimulus announcement provided a strong tailwind for the Aussie. The move aims to boost domestic demand and improve economic conditions, reinforcing support for risk-sensitive assets like the Australian Dollar.
Trade tensions remain a key market driver. Uncertainty surrounding Washington's unpredictable trade policies has left investors on high alert, as potential retaliatory measures from major US trading partners could escalate global trade conflicts. Given Australia's reliance on commodity exports to China, market participants are closely monitoring US tariffs on Chinese imports.
Fed policy expectations remain in focus. Investors anticipate that the Fed will keep rates steady at 4.25%-4.50% when it announces its decision on Wednesday. While some expect rate cuts later in the year, the central bank's guidance will be crucial in shaping near-term US Dollar trends.
Australia's employment data for February, due on March 20, will be closely watched for clues on the Reserve Bank of Australia's (RBA) next policy moves. The data is expected to impact speculation about potential rate adjustments in the coming months.

Source: Fxstreet