The Australian Dollar (AUD) retreated against the US Dollar (USD) on Tuesday, reversing recent gains as economic concerns and global trade tensions weighed on market sentiment. The AUD/USD pair remains under pressure following the release of the Reserve Bank of Australia‘s (RBA) Meeting Minutes and Retail Sales data.
RBA Signals Rate Cut Possibility
Minutes from the RBA’s February meeting underscored downside risks to the Australian economy. While the Board acknowledged a strong labor market as a reason to maintain current interest rates, it highlighted that existing economic conditions were inconsistent with a 2.5% inflation target. This led to a growing case for potential rate cuts.
Retail Sales in Australia showed a modest 0.3% increase in January, recovering from a 0.1% decline in December. However, consumer confidence weakened, with the ANZ-Roy Morgan Australian Consumer Confidence Index falling to 87.7 from 89.8, reversing gains that had lifted sentiment to its highest level since May 2022.
Trade Tensions Weigh on AUD
The AUD also faced headwinds after the White House confirmed that President Donald Trump signed an executive order raising tariffs on Chinese imports to 20%. While Trump has yet to finalize similar measures against Mexico and Canada, China’s status as Australia’s largest trading partner means any economic disruption in China could significantly impact the Australian Dollar.
In response, Canada announced it would impose retaliatory tariffs of 25% on US imports if US tariffs take effect. Meanwhile, China’s Commerce Ministry pledged to take “necessary countermeasures” to safeguard its economic interests.
Financial Summit, US Market Trends in Focus
The Australian Financial Review Business Summit 2025 began on Tuesday, bringing together top industry leaders. Goldman Sachs CEO David Solomon is set to address attendees, followed by RBA Deputy Governor Andrew Hauser on Wednesday.
Meanwhile, the US Dollar Index (DXY) remained steady around 106.50. Optimism over a potential Ukraine peace deal dampened demand for safe-haven assets, as European leaders signaled support for security guarantees for Ukraine, boosting global risk appetite.
US economic data presented mixed signals, with ISM Manufacturing PMI slipping to 50.3 from January’s 50.9, while S&P Global’s Manufacturing PMI for February exceeded expectations at 52.7. The US PCE inflation report met forecasts, with the core PCE index rising to 2.6%, slightly below December’s revised 2.9%.
Additionally, Bloomberg reported that the US has “paused” all military aid to Ukraine, with shipments of weapons and equipment halted at various transit points. The decision, reportedly ordered by President Trump, follows a heated exchange between Trump and Ukrainian President Volodymyr Zelenskyy during peace negotiations.
AUD/USD Faces Bearish Momentum
Despite ongoing bearish pressure, the AUD/USD pair remains above the critical 0.6200 support level, trading near 0.6210 on Tuesday. However, technical indicators signal further downside risks. The nine-day Exponential Moving Average (EMA) at 0.6266 serves as immediate resistance, while a break below 0.6200 could push the pair toward its lowest level since April 2020 at 0.6087.
On the upside, a decisive break above the 50-day EMA at 0.6304 could strengthen short-term momentum, with potential gains toward the three-month high of 0.6408, recorded on February 21.
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