AUD/USD Rebounds To Near 0.6040 As China Vows Stimulus To Support Economy
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- AUD/USD recovers to near 0.6040 as Beijing discusses fresh monetary stimulus to stabilize their economy.
- The escalating trade war between the US and China could dampen the recovery move in the Australian Dollar.
- Potential US recession fears keep the US Dollar on the backfoot.
The AUD/USD pair bounces back to near 0.6040 in Monday’s European session from the fresh five-year low of 0.5930 posted earlier in the day. The Aussie pair gains as the Australian Dollar (AUD) strengthens after China’s top officials consider accelerating monetary stimulus to stabilize their markets in the face of fresh tariffs announced by United States (US) President Donald Trump on Wednesday.
China’s attempt to stimulate their economic growth bodes well for the Australian Dollar, given Australia’s high dependency on exports to them.
However, the outlook of the Australian economy remains uncertain as Australian Treasurer Jim Chalmers stated that the nation expects “big hits to us and Chinese growth”. Also, a swift acceleration in Reserve Bank of Australia (RBA) dovish bets due to Trump’s tariffs could dampen the AUD’s performance.
US President Trump has announced 54% reciprocal tariffs on China in an attempt to fix a significant budget deficit. This has led to a trade war between the two as China has also proposed a 34% import duty on the US as a countermeasure.
Additionally, Trump is reluctant to negotiate with Chinese officials to ease tariffs that are resulting in further escalation in trade tensions between the two. "They want to talk, but there’s no talk unless they pay us a lot of money on a yearly basis," Trump said over the weekend.
Meanwhile, the US Dollar (USD) demonstrates high volatility as investors expect Trump's tariffs to lead to a US economic recession this year. Analysts at JP Morgan expect the US economy to end the year with a 0.3% decline in the Gross Domestic Product (GDP) growth.
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