The Australian Dollar held steady following the presentation of the 2025/26 budget by Australian Treasurer Jim Chalmers before Parliament on Tuesday. The budget deficit is projected at A$27.6 billion for 2024-25 and A$42.1 billion for 2025-26, with GDP growth expected to be 2.25% in fiscal year 2026 and 2.5% in fiscal year 2027. Chalmers’s budget included new tax cuts totaling approximately A$17.1 billion, likely aimed at gaining political support.
Expectations of Chinese economic stimulus continue to support the Australian economy due to the strong trade ties between the two nations. However, the risk-sensitive AUD/USD pair could face potential headwinds due to uncertainty over US President Donald Trump’s tariff announcement scheduled for April 2, which could impact global market sentiment. The US Dollar gained strength as the S&P Global US Services PMI surged to 54.3 in March, marking a three-month high.
The US Dollar Index (DXY) remained stable, trading around 104.30. The mixed PMI data saw the S&P Global US Composite PMI rise to 53.5 in March from February’s 10-month low of 51.6, driven by a rebound in the service sector. Atlanta Fed President Raphael Bostic emphasized ongoing economic uncertainty, suggesting that inflation might progress more slowly than anticipated.
This led to adjustments in 2025 rate cut expectations due to persistent price pressure and trade-related risks.
australia’s pre-election tax cut strategy
These developments in the US were offset by hawkish remarks from Fed Chair Jerome Powell, who pointed out improvements in labor market conditions and inflation moving closer to the 2% longer-term goal.
President Trump has indicated the potential for discussions on trade issues with China and expressed a desire for a meeting with Chinese President Xi Jinping, contributing further to market uncertainty. Domestically, Judo Bank reported positive updates for Australia, with the Manufacturing PMI climbing to 52.6 in March from 50.4 in February and the Services PMI improving to 51.2 from 50.8. The Composite PMI also saw an increase, reaching 51.3 in March. The Reserve Bank of Australia (RBA) is cautious about interest rate decisions.
The RBA’s February statement indicated a conservative approach, closely monitoring US policies and their potential impacts on Australia’s inflation outlook. Technically, the AUD remains below the 0.6300 resistance, trading near 0.6290 on Tuesday, with bearish signals persisting as the pair stays within a descending channel. Key support is at the lower boundary, around 0.6220, and a break below could push AUD/USD towards its seven-week low of 0.6187.
Initial resistance is seen at the nine-day Exponential Moving Average (EMA) of 0.6308, followed by the 50-day EMA at 0.6310. A breakout above these levels could potentially lead to a test of the upper boundary of the descending channel at 0.6320. The situation remains fluid as markets react to domestic and international economic indicators.
Investors continue to watch closely for new developments that could influence the Australian Dollar’s trajectory in the near term.
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