AUD/USD plunges to five-year low, below 0.6000 on US-China tariff war

During the early Asian session on Monday, AUD/USD fell to around 0.5985 for the first time since the COVID-19 pandemic. The Australian dollar (AUD) weakened as China imposed a 34% tariff on all US imports, a move in retaliation for US President Trump's tariffs and adding to concerns of a trade war between the United States and China.

China announced last Friday that it would impose a 34% tariff on all U.S. imports, effective Thursday, in retaliation for Trump's tariffs. This marks Beijing's strongest response yet to the U.S. leader's trade war. Trade tensions between the world's two largest economies sparked some selling as China is an important trading partner for Australia.

Data released by the Labor Department last Friday showed that U.S. nonfarm payrolls (NFP) in March were stronger than expected, increasing by 228,000 from a revised 117,000 in February. Meanwhile, the unemployment rate rose to 4.2% in March, up from the previous 4.1% and higher than the expected 4.1%.

Federal Reserve officials may wait until June to start cutting interest rates after a jobs report showed stronger-than-expected job growth last month, easing concerns about labor market conditions. However, the market still expects the Fed to cut interest rates by one percentage point by the end of the year, and there is a possibility of a fifth rate cut. Rising bets on further rate cuts from the Federal Reserve could weigh on the dollar and could help limit the pair's losses.