AUD/USD bounces back to near 0.6280 as investors shrug off US Trump's tariff threats

• AUD/USD recovers sharply to near 0.6280 as investors digest US Trump's tariff threats quickly.
• Hot China's CPI report has also boosted demand for the Australian Dollar.
• This week, investors will focus on the US CPI and the Fed Powell's testimony before Congress.

The AUD/USD bounces back strongly to near 0.6280 and turns positive after a weak opening near 0.6235 in Monday's European session. The Aussie pair attracts significant bids as investors shrug off fears associated with United States (US) President Donald Trump's tariff threats.

Over the weekend, President Trump threatened to raise 25% tariffs on imports of steel and aluminum from all nations and reciprocal tariffs on nations where he sees unfair trade practices. The impact of Trump's international agenda was visible on the market sentiment as investors rushed to the safe-haven fleet. The US Dollar Index (DXY), which gauges the Greenback's value against six major currencies, had a strong opening to near 108.50 but later on, gives up the majority of intraday gains and drops to near 108.20.

Market participants have started anticipating that Trump's tariff threats are more a negotiation tool to gain an upper hand for closing better deals.

Another reason behind strength in the Australian Dollar (AUD) is faster-than-expected acceleration in the China Consumer Price Index (CPI) data for January. Year-on-year CPI rose by 0.5%, faster than expectations of 0.4% and the former reading of 0.1%. On month, the CPI grew by 0.7% after remaining flat in December but was slower than estimates of 0.8%.

The Australian Dollar (AUD) is a liquid proxy to Chinese Yuan (CNY), being Australia a major trading partner of China.

This week, the major trigger for the US Dollar (USD) will be the Federal Reserve (Fed) Chair Jerome Powell's testimony before Congress on Tuesday-Wednesday and the US CPI data on Wednesday.