Australian Dollar Weakens as Monthly CPI Misses Expectations
The Australian Dollar (AUD) declined against the US Dollar (USD) following the release of February’s Monthly Consumer Price Index (CPI), which registered a 2.4% year-over-year increase—below the expected 2.5% and January’s figure of 2.5%.
Meanwhile, Australian Treasurer Jim Chalmers unveiled the 2025/26 budget, proposing tax cuts totaling A$17.1 billion in two phases. The budget deficit is projected at A$27.6 billion for 2024-25 and A$42.1 billion for 2025-26, with GDP growth forecasts of 2.25% in 2026 and 2.5% in 2027.
The AUD remains under pressure, though investor sentiment suggests the Reserve Bank of Australia (RBA) will hold rates steady next week. This follows the central bank’s February rate cut—its first in four years—amid cautious policy signals. RBA Assistant Governor Sarah Hunter reiterated the bank’s prudent stance on further cuts, citing inflation concerns and external economic influences, particularly from the US.
Global Factors Weigh on AUD as USD Strengthens
The US Dollar gained traction, with the US Dollar Index (DXY) rising to 104.30 as investors exercised caution ahead of President Donald Trump’s upcoming tariff announcement on April 2. While Trump hinted at possible exemptions for certain nations, details remain unclear. Reports suggest Canada could face reduced tariffs, but uncertainty persists regarding the scope of the measures.
Additionally, US economic data bolstered the greenback. The US Composite PMI climbed to 53.5 in March, marking its highest level since December 2024, while the Services PMI rose to 54.3, signaling solid economic expansion. Conversely, the Manufacturing PMI slipped to 49.8, missing expectations of 51.8.
Federal Reserve officials maintained a cautious outlook. Governor Adriana Kugler noted that inflation progress had slowed, while Atlanta Fed President Raphael Bostic warned of persistent price pressures, reducing his expectations for 2025 rate cuts.
Technical Outlook: AUD/USD Faces Resistance at 0.6300
The AUD/USD pair is trading near 0.6280, facing resistance at the nine-day Exponential Moving Average (EMA) of 0.6306. The pair remains in a descending channel, with the Relative Strength Index (RSI) signaling a bearish trend.
Key support lies at 0.6210, with further downside potential toward the seven-week low of 0.6187 recorded on March 5. A breakout above 0.6306 could ease selling pressure, with the next upside target at the March 18 high of 0.6391.
WTI Rises Above $69 on Venezuela Supply Concerns
West Texas Intermediate (WTI) crude oil prices climbed to $69.15 in early Asian trading on Wednesday, driven by a larger-than-expected draw in US crude stockpiles and concerns over tighter global supply following new US tariff threats.
The latest American Petroleum Institute (API) report revealed that US crude oil inventories fell by 4.6 million barrels for the week ending March 14, significantly exceeding market expectations of a 2.5 million-barrel decline. This follows a sharp increase of 4.593 million barrels in the previous week.
Adding to supply concerns, US President Donald Trump announced a 25% tariff on all imports from countries purchasing Venezuelan oil and gas, effective April 2. The new sanctions, alongside additional trade restrictions on Venezuela, have fueled fears of tightening global oil supply, pushing WTI to a three-week high.
However, geopolitical developments may limit further gains. The US has brokered agreements with Ukraine and Russia to suspend maritime and energy-related attacks, while also working to ease certain sanctions on Moscow. This ceasefire could help stabilize global supply, potentially capping WTI’s upward momentum.
PBOC Lowers USD/CNY Reference Rate to 7.1754 Amid Policy Adjustments
The People's Bank of China (PBOC) set the USD/CNY central parity rate at 7.1754 on Wednesday, down from the previous day's fix of 7.1788 and significantly below the 7.2559 projected by Reuters. This marks a slight strengthening of the Chinese yuan against the US dollar, reflecting the central bank’s ongoing efforts to manage currency fluctuations amid evolving economic conditions.
The yuan’s reference rate plays a crucial role in guiding market sentiment, as it determines the allowable daily trading band for the currency. The PBOC maintains a managed float system, allowing the yuan to fluctuate within 2% of the reference rate while intervening when necessary to prevent excessive volatility.
The move comes as China continues to balance economic recovery with financial stability. Recent policy measures, including liquidity injections and adjustments to borrowing costs, indicate a cautious approach by the central bank to support growth while managing external pressures such as US monetary policy decisions, trade uncertainties, and capital outflows.
Additionally, expectations of further stimulus from Beijing remain high. The Chinese government has pledged to boost domestic consumption and stabilize key economic sectors, which could influence the yuan’s performance in the coming months. Investors will closely monitor further PBOC actions, particularly regarding interest rates and potential interventions in the foreign exchange market.
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