AUD/USD struggles to perform despite sheer weakness in US Dollar

• AUD/USD is marginally higher even though the US Dollar has faced strong selling pressure.
• The US private sector added fewer job-seekers in February.
• The US-China trade war has exerted significant pressure on the Australian Dollar.

The AUD/USD pair is slightly higher to near 0.6280 in North American trading hours on Wednesday. The Aussie pair trades marginally higher while the US Dollar (USD) plunges due to multiple headwinds, such as an intensifying trade war and escalating Federal Reserve (Fed) dovish bets.

The Australian Dollar (AUD) is facing significant selling pressure amid a trade war between China and the United States (US). China has announced retaliatory tariffs on the US, resulting in an escalation in trade war between them. Earlier, US President Donald Trump had imposed an additional 10% tariff on China, along with 25% on Canada and Mexico, for pouring drugs into the US economy.

The Aussie Dollar is also the victim of the US-China trade war, knowing that the Australian economy relies heavily on exports to China. Higher tariffs on China have made Chinese products less competitive globally.

Domestically, the Reserve Bank of Australia (RBA) is unlikely to cut interest rates again sooner as their battle against inflation is not over yet, RBA minutes for the February policy meeting showed in which it reduced the Official Cash Rate (OCR) by 25 basis points (bps) to 4.10%.

Meanwhile, soft ADP Employment data for February is expected to exert more pressure on the US Dollar. The ADP reported that private employers added 77K fresh workers, lower than estimates of 140K and the former release of 186K. Soft labor demand in the US private sector is expected to prompt Fed dovish bets, which had already increased due to weak Personal Spending data for January.

For more information about the current status of US employment, investors will focus on the Nonfarm Payrolls (NFP) data for February, which will be released on Friday.