CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75.00% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Analysts at Deutsche Bank have raised concerns regarding the performance of the US dollar (USD) in 2025. A combination of the American tariff policies, weakening role of the country on the global stage and Germany’s fiscal stimulus are likely to lead investors to lose confidence in US assets, dragging the greenback down, the analysts stated. On the other hand, despite domestic and international headwinds and the AUD/USD trading close to multi-year lows in the first quarter, the Aussie dollar (AUD) is expected to rise through 2025.
Here’s a deeper dive into the outlook for the AUD/USD in the remainder of 2025 and what you should know before trading this forex pair.
The Australian dollar traded at $0.6409 on April 28, 2025, representing a 3.57% YTD increase. However, the AUD started the year near 5-year lows against the USD due to strong economic data from the US. Uncertainties around the Chinese economy and potential downward pressure on mineral prices weighed on the Australian dollar.
The US Federal Reserve (Fed) is walking a tightrope balancing between fears of higher inflation due to the Trump tariffs and driving economic growth. Although employment data has been encouraging, there are early signs of the economy cooling. While the central bank kept interest rates steady at 4.25%-4.50% in March, the Fed might cut short-term rates at its May meeting.
Across the Pacific, the Reserve Bank of Australia (RBA) also held its Official Cash Rate (OCR) steady at 4.10% in April, after having cut rates in February for the first time since 2020. Analysts expect the central bank to cut rates at least twice by November, especially if inflation falls within the RBA’s target of 2%-3%. This could bring the OCR down to 3.60%. The interest rate differential between the American and Australian dollars will remain a key driver of fluctuations in the currency pair through 2025.
The back and forth on the US tariff policy has introduced significant uncertainty in the global financial markets. Tariffs on imports from Canada, Mexico and China are likely to strengthen the greenback while pressurising the AUD due to the Australian economy being heavily dependent on exports. While China has been retaliating with reciprocal tariff threats, Beijing’s next move could be to allow the yuan to depreciate in response to the tariffs, a step that the country has taken in the past. This could add to the downward pressure on the Australian dollar, given its correlation with the Chinese economy.
Commodity prices, especially that of gold and iron ore, are among the most important influencers of sentiment on the AUD/USD currency pair. In fact, iron ore price alone is a key indicator of trade balance and the valuation of the Australian dollar. China accounts for 30% of Australia’s total export volume. If Chinese demand for agricultural produce, coal or iron ore declines meaningfully, it would heighten the vulnerability of the AUD.
Iron ore prices declined modestly in the first quarter of 2025 due to trade tensions associated with China. However, decreased ore production in Brazil partly offset the impact on Australia. If the price continues to decline or if construction activity in China remains subdued, it could impact the AUD negatively.
Forecasting currency moves is notoriously difficult. So, while there appear to be several factors that could strengthen the Australian dollar in the second half of the year, it is important for forex traders to keep an eye on the latest economic, trade and geopolitical news. Also, note that the AUD tends to be negatively correlated to the USD. When the latter currency rises, the former tends to fall. Here’s a look at factors that could lead the AUD to appreciate in H2 2025.
The Australian economy has demonstrated its resilience and adaptability to external pressures over the years. Treasurer of Australia, Jim Chalmers, believes that the global trade war and the White House’s sweeping tariffs are unlikely to push the Australian economy into recession. Chalmers’ new Treasury modelling reveals that while there could be “substantial” risks to economic growth, the impact would be “manageable.” The tariffs could trim economic growth by only 0.1% in 2025 while adding 0.2 percentage points to inflation. Meanwhile, the labour market numbers continue to beat expectations. Also, consumer spending has been constrained but has not contracted significantly.
Following the over 4.5% decline in the greenback in April, Goldman Sachs expects the US dollar to have further downside potential. In fact, the American currency fell over 7% since President Trump’s inauguration in January 2025, with the US Dollar Index (DXY) seeing its worst decline since 2022 on April 10. Continued uncertainties regarding tariffs and a potential rise in inflation could keep the USD under pressure.
The Chinese economy could be bolstered by further stimulus measures from the government. This will bode well for Australia, given the nation’s dependence on exports to China. The good news is that there have been indications that Beijing is considering measures to support the domestic property market and drive consumer spending.
The Aussie is a popular currency pair, accounting for about 5% of all forex trading volumes. The forex pair witnesses the highest liquidity during the overlap between the Sydney and Tokyo, and the London and New York trading sessions. The tightest spreads and least slippage are available during the overlaps.
Contracts for Difference (CFDs) are a popular way to trade the AUD/USD since they allow 24/7 trading with leverage. Leverage lowers entry barriers and increases market exposure. However, it also magnifies both profit and loss potential. Risk management is crucial while trading on margin.
Disclaimer:
All data, information and materials are published and provided “as is” solely for informational purposes only, and is not intended nor should be considered, in any way, as investment advice, recommendations, and/or suggestions for performing any actions with financial instruments. The information and opinions presented do not take into account any particular individual’s investment objectives, financial situation or needs, and hence does not constitute as an advice or a recommendation with respect to any investment product. All investors should seek advice from certified financial advisors based on their unique situation before making any investment decisions in accordance to their personal risk appetite. Blackwell Global endeavours to ensure that the information provided is complete and correct, but make no representation as to the actuality, accuracy or completeness of the information. Information, data and opinions may change without notice and Blackwell Global is not obliged to update on the changes. The opinions and views expressed are solely those of the authors and analysts and do not necessarily represent that of Blackwell Global or its management, shareholders, and affiliates. Any projections or views of the market provided may not prove to be accurate. Past performance is not necessarily an indicative of future performance. Blackwell Global assumes no liability for any loss arising directly or indirectly from use of or reliance on such information here in contained. Reproduction of this information, in whole or in part, is not permitted.
