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February 6, 2025

AUD/USD Under Pressure as Trump’s Inauguration Looms and Fed Holds Rates Steady as reported by Bitcoinethereumnews.com

The Australian Dollar (AUD) has softened to around 0.6190 against the US Dollar (USD) in early Asian trading on Monday, as investors await the inauguration of President-elect Donald Trump and the US Federal Reserve’s (Fed) decision on interest rates. The Fed is expected to hold rates steady in its January meeting, but the market is cautious about Trump’s potential policies, including tariffs, tax cuts, and deportations, which could impact the US economy and the AUD.

Trump’s Tariff Threats Weigh on AUD

The possibility of renewed trade tensions between the US and China, Australia’s largest trading partner, could exert selling pressure on the AUD. China is a significant market for Australian exports, and any disruption to trade could negatively impact the Australian economy. However, the recent upbeat Chinese economic data, which showed a 5.4% year-over-year growth in the fourth quarter, could provide some support to the AUD.

Interest Rates and Iron Ore Prices Key Drivers of AUD

The level of interest rates set by the Reserve Bank of Australia (RBA) is a crucial factor in determining the value of the AUD. Higher interest rates compared to other major central banks support the AUD, while lower rates can weaken it. The RBA’s main goal is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down.

Iron Ore Prices and Trade Balance Also Influence AUD

Iron Ore is Australia’s largest export, accounting for a significant portion of the country’s trade revenue. Higher Iron Ore prices tend to increase demand for the AUD, while lower prices can weaken it. The Trade Balance, which is the difference between Australia’s exports and imports, is also an important factor in determining the value of the AUD. A positive Trade Balance strengthens the AUD, while a negative balance can weaken it.

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Market Sentiment and Risk Appetite

Market sentiment, whether investors are taking on more risk or seeking safe-havens, also plays a role in determining the value of the AUD. Risk-on sentiment is positive for the AUD, while risk-off sentiment can weaken it.

In conclusion, the AUD/USD pair is under pressure as investors await Trump’s inauguration and the Fed’s decision on interest rates. The AUD is vulnerable to Trump’s tariff threats and the potential for renewed trade tensions with China. However, the recent upbeat Chinese economic data and higher Iron Ore prices could provide some support to the AUD.

Source: Bitcoinethereumnews.com

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