Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Budget worries weigh on USD
The US dollar was mostly weaker overnight as difficult US budget negotiations hit sentiment towards the US dollar with investors already nervous after a volatile few months thanks to US president Donald Trump’s trade war.
President Trump and Republican lawmakers have been deadlocked over questions about the size of state and local government tax deductions and potential cuts to social security.
The US dollar’s losses were most pronounced versus the so-called safe haven markets with USD/JPY down 0.2% while the USD/CHF fell 0.7%.
In Asia, the greenback was steadier, with USD/SGD and USD/CNH both flat on the day.
The Aussie and kiwi bucked the trend, with both currencies lower, after yesterday’s Reserve Bank of Australia move to cut interest rates.
The AUD/USD fell 0.6% with the Aussie lower versus most other major markets. The AUD/EUR led losses as it dropped 0.9% while AUD/JPY lost 0.8%.
The NZD/USD lost 0.1%.
RBA cuts, dovish shift sparks economic concerns
The Reserve Bank of Australia (RBA) cut the cash rate by 25 basis points (bps), as widely anticipated, bringing it down to 3.85%.
The central bank’s statement reflected a more dovish tone, highlighting concerns about rising unemployment, which could approach 6% in a potential “Trade War” scenario.
Additionally, the RBA revised its trimmed mean CPI forecast downward to 2.6% (from 2.7%) and lowered its GDP growth projection for December 2025 to 2.1% (from 2.4%).
The RBA noted that recent indicators of household spending have been weaker than expected, attributing this to slower-than-anticipated increases in real income. The board identified global uncertainties as a significant factor contributing to Australia’s weaker economic outlook.
While labour market conditions remain tight, the RBA acknowledged that inflation risks have become more balanced, with international developments expected to exert downward pressure on the economy.
AUD/USD took a dive post RBA’s rate decision. However, from a technical lens AUD/USD still looks more likely to eke out gains, with 30-day trading range still at slightly above average level. However, the Aussie is at a critical level, sitting on key support levels of 50-day EMA of 0.6362 and 21-day EMA of 0.6404.
For AUD/EUR and AUD/NZD however, EUR and NZD buyers may look to take advantage soon, given both are near the top end of the 30-day trading range.
Tariff effects evident in China’s April data
After a strong performance in the first quarter, China’s economic growth showed signs of slowing in April.
Retail sales growth eased to 5.1% year-on-year, down from previous levels. Both infrastructure and manufacturing fixed asset investment (FAI) experienced slight slowdowns.
The property sector also weakened, with declines in both property sales and new project starts compared to the previous year.
Export growth decelerated less than anticipated, though shipments to the U.S. dropped by 21% year-on-year, while exports to ASEAN countries surged by 21%, reflecting the impact of U.S. tariffs.
Meanwhile, both the Consumer Price Index (CPI) and Producer Price Index (PPI) remained in deflation.
That said, USD/CNH continues to show signs of a rebound, where USD buyers may look to take advantage now, in line with our views that the path of least resistance is higher.
The next key resistance levels to keep an eye on are 21-day EMA of 7.2366, and 200-day EMA of 7.2477.
Aussie lower after RBA
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 19 – 24 May
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
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