China Worries Weigh on Australian Consumer Confidence and AUDUSD
AUD/USD failed at the 100 daily SMA again, reversing down, with China worries and consumer sentiment weighing the price down.
The AUD/USD is at risk of further declines if consumer confidence continues to drop and RBA rate cuts become more likely. However, movements in the USD, global risk appetite, and trade policy developments will also play a key role.
If the FED weakens its monetary policy stance, the AUD could find some support despite domestic economic concerns. Besides that, China’s economic slowdown and U.S.-China trade tensions directly impact Australia’s exports, especially in mining and commodities.
AUD/USD Daily Chart – The 100 SMA Rejects It Again
The Australian dollar made modest gains last week, rising 0.5 cents against the U.S. dollar. However, this movement paled in comparison to the 4-cent rallies seen in the Euro and British Pound. Despite a strong rebound in February, primarily driven by U.S. dollar weakness, the AUD/USD remains under pressure after an 8-cent decline in Q4 2024.
Earlier in February, the pair briefly dipped below 0.61, but a delay in U.S. trade tariffs triggered a sharp rebound, pushing it above 0.64 by late February. However, the 100-day simple moving average (SMA) acted as resistance, rejecting further gains and forcing AUD/USD lower once again.
Tariffs on China Pressure the Aussie
The latest downturn in AUD/USD came as the U.S. raised tariffs on Chinese imports by an additional 10% last week. Given China’s status as Australia’s largest trading partner, these trade restrictions have had a direct impact on the Australian economy and its currency. As a result, the pair fell by over two cents, slipping back below 0.63.
Interestingly, despite the formal implementation of tariffs, the Australian dollar saw a brief recovery early last week. This was largely due to ongoing market volatility, shifting investor sentiment, and uncertainty surrounding future trade policy adjustments.
Consumer Confidence Declines as RBA Holds Rates
Adding to the Australian dollar’s struggles, the latest Consumer Confidence Index—released earlier today—showed another decline. While the Reserve Bank of Australia (RBA) implemented its first rate cut recently, interest rates remain relatively high, weighing on consumer sentiment. With economic uncertainty persisting and trade pressures mounting, the AUD/USD remains vulnerable to further downside.
ANZ-Roy Morgan Australian Consumer Confidence Index – February Update
- Consumer Confidence Index fell to 86.9 points in February, down from 87.7 the previous week.
- A reading below 100 indicates that pessimists outnumber optimists, signaling weak consumer sentiment.
ANZ Commentary & Key Factors
- Despite the drop, confidence remains 1.8 points higher than before the Reserve Bank of Australia (RBA) rate cut.
- The decline may be partially due to the lingering effects of ex-Tropical Cyclone Alfred, which impacted economic activity and sentiment.
- Broader economic uncertainty, high inflation, and cautious consumer spending continue to weigh on confidence.
While the recent RBA rate cut provided some support, overall consumer sentiment remains fragile. Natural disasters, trade concerns, and economic policy uncertainty are key factors keeping confidence low. Moving forward, further rate cuts or economic stabilization may be needed to restore optimism.
AUD/USD Live Chart
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