AUD/USD continues to face pressure near 0.6300, US NFP in focus

AUD/USD edges higher but remains below 0.6300 ahead of the US NFP data for January.
The US NFP data would drive market expectations for the Fed’s interest rate outlook.
Investors await the Trump-Jinping meeting to get more developments on the trade relations between China.

The AUD/USD pair ticks higher in Friday’s European session but continues to face pressure near 0.6300. The Aussie pair turns sideways as investors await the United States (US) Nonfarm Payrolls (NFP) data for January, which will be published at 13:30 GMT.

Market participants will keenly focus on the employment data, which will provide cues about how long the Federal Reserve (Fed) will keep interest rates steady between 4.25% and 4.50%.

According to estimates, the US economy added 170K workers last month, fewer than 256K in December. The Unemployment Rate is estimated to have remained steady at 4.1%. Signs of a strong job market would boost market expectations that the Fed will keep interest rates steady for longer. On the contrary, soft numbers would force traders to increase their dovish bets.

Ahead of the US NFP data, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades in a tight range below 108.00.

Meanwhile, the Australian Dollar (AUD) has performed strongly in the past few trading sessions amid expectations that US President Donald Trump and Chinese Leader XI Jinping will have a meeting to reach a deal and roll back tariffs. This week, China retaliated against 10% tariffs from Donald Trump by imposing 15% levies on coal and Liquified Natural Gas (LNG), and 10% for crude oil, farm equipment and some autos.

Such a scenario will be favorable for the Aussie dollar as Australia is the leading trading partner of China.

On the monetary policy front, traders have fully priced in a 25-basis points (bps) interest rate reduction by the Reserve Bank of Australia (RBA) in the policy meeting on February 18.

US-China Trade War FAQs

What does “trade war” mean?

Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. It implies the creation of trade barriers, such as tariffs, which result in counter-barriers, escalating import costs, and hence the cost of living.

What is the US-China trade war?

An economic conflict between the United States (US) and China began early in 2018, when President Donald Trump set trade barriers on China, claiming unfair commercial practices and intellectual property theft from the Asian giant. China took retaliatory action, imposing tariffs on multiple US goods, such as automobiles and soybeans. Tensions escalated until the two countries signed the US-China Phase One trade deal in January 2020. The agreement required structural reforms and other changes to China’s economic and trade regime and pretended to restore stability and trust between the two nations. However, the Coronavirus pandemic took the focus out of the conflict. Yet, it is worth mentioning that President Joe Biden, who took office after Trump, kept tariffs in place and even added some additional levies.

Trade war 2.0

The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China once he returned to office, which he did on January 20, 2025. With Trump back, the US-China trade war is meant to resume where it was left, with tit-for-tat policies affecting the global economic landscape amid disruptions in global supply chains, resulting in a reduction in spending, particularly investment, and directly feeding into the Consumer Price Index inflation.