Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
US-China trade talks weigh on sentiment
The Australian dollar retreated from seven-month highs this morning as uncertainty surrounding US-China trade talks in London triggered market jitters.
Although negotiations were extended for a second day, the absence of concrete announcements led to broad weakness across global markets, weighing on key FX pairs.
AUD/USD gained 0.4% by the session’s end but remained below earlier highs.
NZD/USD also eased from its peak but still closed up 0.6%, hovering near eight-month highs.
USD/CNH declined 0.2%, while USD/SGD slipped 0.3%.
’50-50′ chance tariffs will prolong US inflation
St. Louis Fed President Alberto Musalem warned that US policymakers would face uncertainty “right through the summer,” estimating a “50-50” chance that tariffs from President Donald Trump’s trade policies could lead to sustained inflation, according to the Financial Times.
While US tariffs might drive inflation for “a quarter or two,” Musalem acknowledged an equally plausible scenario in which the price impact persists longer.
Meanwhile, Philadelphia Fed President Patrick Harker suggested there could be an opportunity to lower rates in the second half of the year but emphasized the need for patience.
He described Friday’s jobs report as “solid.”
Looking at risk-sensitive commodity currency such as AUD/USD, the pair remains above the 30-day range average, providing short-term opportunity for USD buyers.
The next support levels for AUD/USD stand at the 21-day EMA of 0.6456, followed by the 50-day EMA of 0.6408.
China’s deflation adds to CNH pressure
May data showed China’s consumer deflation continuing at -0.1% year-over-year, slightly better than the -0.2% Bloomberg consensus forecast.
Despite the Golden Week holiday, weak domestic demand remains evident. Given ongoing US-China trade uncertainties and an intensifying price war among domestic automakers, deflationary pressures are expected to persist.
PPI deflation extended its streak to 32 consecutive months, dropping 3.3% year-over-year, worse than the 3.2% decline projected by analysts.
USD/CNH remains more than 3% below its April 8, 2025 peak of 7.4290.
Key resistance levels to watch include the 21-day EMA at 7.2010 and the 50-day EMA at 7.2280.
Aussie eases, but remains near highs
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 9 – 14 May
Have a question? [email protected]
*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.
Leave a Reply