07 Mar 2025

The Australian Dollar experiences a decline as market participants exercise caution in anticipation of the Nonfarm Payrolls report scheduled for release on Friday. The AUD may receive some support following President Trump’s decision to exempt goods from Mexico and Canada under the USMCA from the proposed 25% tariffs. The US Nonfarm Payrolls are projected to rise to 160,000 in February, an increase from January's lower figure of 143,000.

On Friday, the Australian Dollar (AUD) continues to trade lower against the US Dollar (USD) for the second consecutive day. The AUD/USD pair remains under pressure following the publication of China's Trade Balance figures. Market attention is now directed towards the upcoming US Nonfarm Payrolls (NFP) report later in the North American trading session.

China's trade surplus surged to USD 170.52 billion in February, an increase from USD 158.44 billion during the same month last year, surpassing expectations of USD 142.4 billion, largely due to a decrease in imports. Year-over-year exports rose by 2.3%, falling short of the anticipated 5% growth, while imports unexpectedly fell by 8.4%, contrary to forecasts of a 1% rise.

Market participants remain attentive to global trade dynamics, particularly as Canada has delayed its planned second round of retaliatory tariffs on US goods until April 2. This decision follows President Trump's exemption of Mexican and Canadian products from the proposed 25% tariffs under the USMCA.

The Reserve Bank of Australia (RBA) continues to project a deceleration in economic growth, anticipating a decline to approximately 2% by the year 2025. Although this outlook has historically supported the strength of the Australian Dollar (AUD), investors are exercising caution regarding possible adjustments in policy due to inflationary pressures and changes in the labor market.

Despite the release of Australian GDP data that exceeded expectations, the Australian Dollar faced challenges amid uncertainties surrounding trade policies and overarching economic issues. In the fourth quarter of 2024, Australia’s GDP increased by 0.6% compared to the previous quarter, surpassing the 0.3% growth recorded in the third quarter and exceeding market forecasts of 0.5%. Year-over-year, GDP rose to 1.3% in the fourth quarter, up from 0.8% in the preceding quarter.

Additionally, geopolitical tensions pose a potential risk to economic stability. A spokesperson from the Chinese foreign ministry indicated late Wednesday that China is ready to engage in "any type" of conflict in response to the escalating trade tariffs imposed by Trump, as reported by the BBC. Given that China is Australia’s largest trading partner, this situation could negatively impact the Australian Dollar.