Australian Dollar Falls Despite US-China Trade Progress; US CPI in Focus

Australian Dollar Slips Despite Eased US-China Trade Tensions; US CPI in Focus

AUD/USD Faces Pressure as Investors Watch CPI Data

The Australian Dollar (AUD) traded lower on Wednesday, losing ground against the US Dollar (USD) despite optimism from improving US-China trade relations. The pair retreated from recent gains, with investors shifting their focus to the upcoming US Consumer Price Index (CPI) report, due later in the day.

US-China Trade Progress Could Reignite AUD Demand

On Tuesday, US Commerce Secretary Howard Lutnick confirmed that the US and China had agreed on a framework to implement the Geneva Consensus, aimed at reducing trade friction. While China's Vice Commerce Minister Li Chenggang described talks as frank and reasonable, he noted that the framework still requires approval from Chinese leadership.

The Geneva Consensus includes expected resolutions on rare earth minerals and magnet exports, key components in global manufacturing, which may support global trade sentiment and ultimately benefit trade-dependent currencies like the AUD.

China’s Role Crucial in Shaping AUD Sentiment

Given Australia’s strong trade ties with China, economic activity in China—especially involving exports, commodities, and supply chains—has a significant influence on the Australian Dollar. A full implementation of the trade deal would be supportive of Australia’s export economy.

What’s Next? CPI in the Spotlight

Traders will closely watch the US May CPI release, forecasted to show a 2.5% YoY rise. Stronger-than-expected inflation could boost the USD further, extending the AUD/USD decline.