AUD/USD soars to near 0.6050 amid significant weakness in US Dollar

• AUD/USD surges almost 1.4% to near 0.6050 as the US Dollar faces an intense sell-off.
• US-China trade war could send lead to shockwaves to the Australian economy.
• Fed Kashkari expects Trump's tariffs to increase inflation and weigh on GDP growth.

The AUD/USD rallies to near 0.6050 during North American trading hours on Wednesday. The Aussie pair strengthens as the US Dollar (USD) slides sharply amid fears that deteriorating trade relations between the United States (US) and China could push the economy into a recession.

The US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, tumbles to near 102.00. The S&P 500 opens on a slightly positive note, exhibiting an increase in the risk-appetite of investors.

The tariff war between the US and China has escalated as the latter has increased counter-tariffs to 84%, matching reciprocal levies imposed on Beijing by President Donald Trump on Tuesday. Such a scenario will force US importers to look for other nations to buy substitutes for Chinese goods. Market participants expect the event to be inflationary as the purchase of similar goods from other nations won't be cost-effective, given the competitive advantage of China in manufacturing due to lower labor costs.

Market experts also believe that the inflationary impact of the US-China trade war could also lead to a recession in the US. During North American hours, Minneapolis Federal Reserve (Fed) Bank President Neel Kashkari said, "Near-term inflation will climb, purchasing power will go down, investment will likely be lower, and GDP will be smaller due to tariffs."

Going forward, investors will focus on the Federal Open Market Committee (FOMC) minutes of the March meeting, which will be published at 18:00 GMT.

Though investors have underpinned the Australian Dollar (AUD) against the US Dollar, its outlook remains weak as potential economic shocks due to the US-China trade war. The Australian economy is expected to be one of the major victims of the trade war, given its significant reliance on exports to China.