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How will tariff hikes and RBA minutes impact the AUD/USD outlook?
The AUD/USD rebounds as Trump raises tariffs on steel and aluminum imports. Investors now focus on Australia's Q1 GDP print and RBA meeting minutes for cues.
AUD/USD rebounds after tariff developments
The AUD/USD finished lower last week at 0.6431 (-0.98%), reversing after hitting a fresh six-month high of 0.6537 at the start of the week.
The decline in the Australian dollar followed a batch of weak domestic data across retail sales, building approvals and capex. Support for the US dollar came from President Trump's decision to once again back down on tariffs, this time on Europe. Month-end rebalancing flows also bolstered the greenback.
The AUD/USD has rebounded at the start of the new week, hitting a high of 0.6472 this morning after President Donald Trump announced on Friday after markets closed that tariffs on steel and aluminium imports would increase from 25% to 50%, effective June 4, 2025.
Staying on the subject of tariffs, last week's US Court of International Trade decision to block most of Trump's tariffs was a temporary setback, with the White House expected to use alternative legal avenues to achieve its tariff goals.
A key factor is the increasing focus on revenue, given the large deficits linked to Trump's tax bill, currently under Senate review ahead of the July 4 signing deadline. Higher tariffs and larger fiscal deficits are expected to continue to exert pressure on the USD in the weeks ahead.
Apart from tariff developments, the AUD/USD will also be influenced by risk sentiment and this week's key US data, including ISM PMIs, JOLTS job openings, and Friday's crucial US non-farm payrolls.
Locally, attention will be on the Reserve Bank of Australia (RBA) meeting minutes tomorrow, which will be scrutinised for insights into the discussions for and against a 50basis point (bp) RBA cut last month, as well as Wednesday's Q1 2025 GDP previewed below.
Q1 2025 GDP
Date: Wednesday, June 4 at 11.30am AEST
In the last quarter (Q4 2024), Australian GDP increased by 0.6% for an annual rate of 1.3%. It was the Australian economy's thirteenth consecutive quarter of growth and the highest reading since Q4 2022. Importantly, GDP per capita grew 0.1% quarter-on-quarter (QoQ), snapping seven consecutive quarters of falls.
Katherine Keenan, ABS head of national accounts, said: 'Modest growth was seen broadly across the economy this quarter. Both public and private spending contributed to the growth, supported by a rise in exports of goods and services.'
The rise in Q4 2024 GDP supported the idea that growth in the Australian economy bottomed out at 0.8% year-on-year (YoY) in Q3 and that a rebound is underway.
Recent history of AU annual GDP
- Q1 2023: 2.4%
- Q2 2023: 2.1%
- Q3 2023: 2.1%
- Q4 2023: 1.5%
- Q1 2024: 1.1%
- Q2 2024: 1.0%
- Q3 2024: 0.8%
- Q4 2024: 1.3%
As we await the final partial components for this week's Q1 2025 GDP print, the preliminary forecast is for a rise of 0.4% QoQ, lifting the annual growth rate to 1.5% - on track to meet the RBA's forecasts of 1.8% for June 2025 and 2.1% for December 2025.
Ahead of the data, the Australian interest rates market is pricing in a 70% chance of a 25bp rate cut in July and a cumulative 75bp of RBA rate cuts between now and year-end.
Australian annual GDP growth rate chart
AUD/USD technical analysis
After completing a triangle-style "ABCDE" five-wave correction in early April at the 0.6389 high, the AUD/USD dropped to a low of 0.5912 on April 9. From there, it springboarded back above 0.6500 in early May, leaving a V-shaped bottom in its wake, frequently seen at medium-term lows.
The AUD/USD has spent the past month consolidating its rebound from the April lows in a range between 0.6350 and 0.6540 - either side of the 200-day moving average, currently at 0.6446.
After the current period of consolidation is completed (which may include a dip back towards 0.6350), we look for the AUD/USD to extend its gains towards medium-term resistance at 0.6740/50. This includes the 200-week moving average and the downtrend line from the 0.8007 high of February 2021.
AUD/USD daily chart
- Source: TradingView. The figures stated are as of 2 June 2025. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.
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