The Australian dollar’s unexpected rally against the US dollar may continue if the Trump administration extends its trade truce with China, according to Commonwealth Bank strategists. This positive outlook is further supported by a surprising resurgence in iron ore prices. CBA strategists believe a meeting in Stockholm between Chinese officials and US Treasury Secretary Scott Bessent could act as a catalyst for further gains in the Aussie dollar.
Earlier this month, CBA cautioned clients that the Australian dollar might decline if US President Donald Trump implemented long-delayed trade tariffs. However, the currency has since defied expectations, reaching US66¢ for the first time since November, a rally that has surprised many traders. While risks remain leading up to the August 1 deadline for the tariffs, factors such as the construction of a major dam in Tibet and efforts by Beijing to bolster its economy have contributed to the dollar’s strength.
Iron ore, a crucial Australian export, has seen prices jump by 12 per cent in the past month, reaching a five-month high above $US105 a tonne this week. Despite some traders anticipating that Chinese steel production cuts would negatively impact iron ore prices, the commodity’s resilience has played a significant role in pushing the Australian dollar to an eight-month high of US66.25¢ this week.
These factors collectively contribute to the current strength of the Australian dollar, demonstrating its sensitivity to both international trade relations and commodity market dynamics.
