28 Mar 2025

The AUD/USD pair continues to face challenges in gaining significant momentum on Friday. A slight increase in the USD, coupled with a deteriorating risk appetite, poses obstacles for the Australian Dollar. Nevertheless, expectations for additional stimulus from China provide some support ahead of the upcoming US PCE data.

On Friday, the AUD/USD pair has been engaged in a sideways consolidation for the fourth consecutive day, remaining within a range near the 0.6300 level during the initial part of the European session.

Global risk sentiment has been negatively impacted by US President Donald Trump's recent announcement of new tariffs on imported cars and light trucks, made on Wednesday. Furthermore, the anticipation of Trump's forthcoming reciprocal tariff announcement next week, along with concerns about its effects on the global economy, has further dampened investor sentiment. This situation is contributing to the headwinds faced by the risk-sensitive Australian Dollar (AUD), which, along with a modest rise in the US Dollar (USD), is applying pressure on the AUD/USD pair.

However, the intraday increase in the USD lacks strong bullish momentum, as there is a growing consensus that the Federal Reserve (Fed) is likely to resume its rate-cutting cycle soon. Currently, the markets are pricing in over a 65% probability that the US central bank will reduce borrowing costs by at least 25 basis points in June, driven by concerns regarding the potential economic repercussions of Trump's aggressive trade policies. This may deter USD bulls from making aggressive bets, thereby providing some support for the AUD/USD pair.

In addition, optimism regarding further stimulus from China helps to mitigate losses for the Australian Dollar. Traders appear hesitant to make bold directional bets, choosing instead to await the release of the US Personal Consumption Expenditure (PCE) Price Index, which is scheduled for later in the North American session. This critical US inflation data is expected to influence expectations regarding the Fed's future policy direction, which will be instrumental in shaping USD demand and potentially offering new momentum to the AUD/USD pair.