Australian dollar plunges on market jitters

AUD/USD has slipped below the 60-cent level for since March 2020, during the Covid pandemic. The Australian dollar, a risk currency, has been rocked by the meltdown in the global equity markets.

Investors are jittery that the latest round of US tariffs will lead to a global recession. This has triggered sharp movements in the currency markets as well, with the US dollar, Swiss franc and Japanese yen benefitting from moves into safe-haven assets.

Australian confidence numbers expected to fall

Australia releases confidence data on Tuesday, with both consumer and business confidence expected to ease. Westpac consumer confidence is projected to decline by 0.9% in April after a stellar 4% gain in March. The NAB business confidence index is projected to decline by -4 in March, following a -1 reading a month earlier.

RBA likely to cut at May meeting

The market turmoil has the Reserve Bank of Australia nervous and could shake the central bank into faster and deeper rate cuts than previously planned. The RBA meets in May and a 25-basis point rate cut is likely, with a jumbo 50-bps cut a slight possibility.

The RBA has been hawkish and finally lowered rates in February, but remained concerned about the upside risk of inflation. The central bank has bigger worries now, such as the escalating trade tensions, which could be disastrous for Australia's export sector.

China has imposed 34% counter-tariffs on the US and an all-out trade war between the two largest economies in the world would be very damaging to Australia, as China is its biggest trading partner.

• AUD/USD tested resistance at 0.6120 earlier. Above, there is resistance at 0.6252
• There is support at 0.5907 and 0.5775