The Australian and NZ dollars faced selling pressure on Monday. Investors were cautious ahead of the U.S. announcement on reciprocal tariffs. This uncertainty weighed on risk sentiment, limiting gains for both currencies.
Bonds in Australia and New Zealand rallied as global investors moved toward safe-haven assets. Short-term bond yields fell to their lowest levels in nearly six months. Traders were preparing for potential volatility from U.S. policy changes.
The Australian dollar remained flat at $0.6286. Last week, it gained 0.3% and was on track for a 1.6% quarterly gain. However, it remained within a narrow range of $0.6260 to $0.6330.
The New Zealand dollar edged 0.1% lower to $0.5712 after ending last week 0.2% lower. It was set for a 2.2% quarterly gain, with resistance near the 21-day moving average of $0.5730.
On Sunday, U.S. President Donald Trump confirmed that the new reciprocal tariffs would affect all countries. This announcement dashed market hopes that some economies might receive exemptions.
Meanwhile, the Reserve Bank of Australia (RBA) was set to announce its latest policy decision on Tuesday. Most analysts expected the central bank to keep rates at 4.1%. However, any shift in its stance could impact the Aussie. If the RBA adopts a dovish tone, markets may start pricing in a rate cut as early as May.
Kristina Clifton, an economist at the Commonwealth Bank of Australia, suggested that AUD/USD could test $0.62 this week. This would depend on how financial markets react to the U.S. tariff policy and the RBA’s statement.
Currently, swaps indicate only an 18% chance of an RBA rate move on Tuesday. However, the probability of a rate cut in May is around 70%. Markets also anticipate three rate cuts throughout 2025, though the RBA has suggested it may not cut rates that aggressively.
Australian government bond yields declined sharply. Three-year bond yields fell 11 basis points to 3.668%, the lowest level since early October. In New Zealand, two-year bond yields dropped 9 basis points to 3.525%, also reaching their lowest point since October.
Later this week, the RBA will release its Financial Stability Report. Traders will watch closely for insights into the central bank’s outlook on economic risks.
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Australian and NZ dollars weaken as US tariff concerns weigh on markets. The RBA’s policy decision could impact AUD/USD. Stay updated!
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