Australian Dollar rises as US Dollar struggles amid easing fears of inflation spikes
The Australian Dollar (AUD) halted its six-day losing streak on Monday, buoyed by a weaker US Dollar (USD) following the release of January's Personal Consumption Expenditures (PCE) inflation data on Friday. The report aligned with expectations, easing fears of unexpected inflation spikes in the US.
Australia's TD-MI Inflation Gauge fell by 0.2% month-over-month in February, reversing a 0.1% rise in January. This marked the first decline since last August and followed the Reserve Bank of Australia's (RBA) decision to cut its cash rate by 25 basis points to 4.1% during its first monetary policy meeting of the year, reflecting a continued slowdown in underlying inflation. However, on an annual basis, the gauge rose by 2.2%, slightly below the previous 2.3% increase.
The AUD also receives upward support from upbeat Chinese economic data. China's Caixin Manufacturing Purchasing Managers' Index (PMI) rose to 50.8 in February from January's 50.1, exceeding market expectations of 50.3. Given China's role as a key trading partner for Australia, the stronger PMI reading provided a boost to the Australian Dollar.
However, the AUD's upside could be limited by escalating US-China trade tensions. Over the weekend, US President Donald Trump announced an additional 10% tariff on Chinese imports starting Tuesday, adding to the 10% tariff imposed last month. On Thursday, Trump stated on Social Truth that 25% tariffs on Canadian and Mexican goods will take effect on March 4.
Ssource: FXStreet
