Australian dollar rebounds as market turmoil eases

The Australian dollar has posted strong gains on Tuesday. In the European session, AUD/USD is trading at 0.6038, up 0.92% on the day. The Aussie has been swinging wildly and plunged 4.6% on Friday.

Australian consumer confidence sinks

Australia posted soft confidence numbers on Tuesday. The Westpac consumer confidence index declined by 6.0% in April to 90.1, its sharpest loss since May 2023. This was the first drop since January and followed a 4.0% gain in March.

The survey found that consumers are increasingly pessimistic, particularly over US tariff policy. The latest round of tariffs include a 10% tariff on Australian goods.

Business confidence is also deteriorating. The NAB business confidence index edged lower to -3 in March, down from -2 in February and in line with the market estimate. The massive selloff in the financial markets raises the risk of further decline in consumer and business confidence.

The tariff turmoil will likely force the Reserve Bank of Australia to continue cutting rates. The RBA is lagging behind other central banks and has lowered rates only once in its easing cycle, but the markets are expecting up to four rate cuts this year and have priced in a 25-basis point cut in May at 94%.

In the face of the massive selloff on global markets, US President Trump has remained defiant. China has imposed 34% reciprocal tariffs on US goods and Trump has threatened to slap China with a 50% tariff in response to the latest Chinese move.

The mounting escalation between the two largest economies in the world threatens to erupt into a full-scale trade war which would hurt the Australian economy, as China is Australia's biggest trade partner.

AUD/USD has pushed above resistance at 0.6016. The next resistance line is 0.6098

There is support at 0.5903 and 0.5821