AUD/USD slipped on Monday. The pair traded near 0.7051 after briefly moving above 0.7100 earlier in the day. The Australian Dollar struggled to gain even as the US Dollar weakened.
On Friday, the US Supreme Court ruled that President Donald Trump’s use of the International Emergency Economic Powers Act to impose broad tariffs was unlawful. President Trump then announced a 15% global tariff under Section 122 of the Trade Act of 1974.
Market Reaction And Dollar Dynamics
The US Dollar initially fell, then stabilized as markets adjusted to the new tariff framework. The US Dollar Index held around 97.67 after hitting an intraday low near 97.35.
Lower expectations for an imminent Federal Reserve rate cut also supported the US Dollar. Markets still price in about 50 basis points of cuts by year-end. Fourth-quarter GDP growth is described as sluggish, while PCE inflation remains firm.
In Australia, traders see a chance of another rate rise in March after stronger data and tighter policy signals. Inflation data due Tuesday is expected to show headline CPI at 3.7% year-on-year in January, down from 3.8% in December. Trimmed Mean CPI is expected to hold steady at 3.3% year-on-year.
We remember how the surprise 15% global tariff introduced in early 2025 drove major trade tensions. That policy weighed on risk-sensitive currencies through last year. As a result, AUD/USD fell steadily from above 0.7000 to a trading range near 0.6550.
Shifting Policy Outlook And Trading Implications
The US Dollar outlook has changed a lot since the 2025 policy debates. The Federal Reserve kept rates steady for much of last year to fight tariff-driven inflation, but growth has since weakened. January’s Non-Farm Payrolls report showed only 85,000 new jobs. This has increased expectations for rate cuts later this year.
In Australia, the hawkish mood from early 2025 has faded. The global trade slowdown has cooled the local economy. The latest data shows Q4 2025 headline CPI falling to 2.9%. This puts the Reserve Bank of Australia closer to the Federal Reserve, with markets now expecting easing from both.
For derivative traders, the main story is no longer the clear policy split seen in 2025. Instead, markets are dealing with a broad global slowdown. The key question is which central bank cuts first, and how quickly. In this setting, buying volatility using straddles or strangles may be a sensible way to prepare for sharp moves in either direction.
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