AUD/USD stabilizes amid supporting China data, trade tensions

• AUD/USD stabilizes above 0.6500 after China's trade surplus data came in below expectations.
• Trade tensions between the United States and China continue to weigh on market sentiment, despite a softer tone from US President Trump.
• The ongoing US government shutdown and the Reserve Bank of Australia's hawkish stance support the Aussie pair.

AUD/USD posts a firm rebound at the start of the week, rising by 0.80% to 0.6520 on Monday at the time of writing, after sharp losses on Friday. However, the Aussie pair stabilizes since the bullish move that followed the weekly Asian session opening, and shows little movement following the release of China's September Trade Balance data, which came in at CNY 645.47 billion versus CNY 732.7 billion in the previous month. In US Dollar (USD) terms, China's trade surplus reached $90.45 billion, below the expected $98.96 billion.

Exports rose by 8.4% YoY, while imports advanced 7.5%, indicating a recovery in domestic demand, which may add support to the Australian Dollar (AUD) while Australia exports massively to China.

On the geopolitical front, the rhetoric between Washington and Beijing continues to unsettle markets. On Friday, US President Donald Trump threatened to impose 100% tariffs on Chinese imports starting November 1, reigniting fears of a trade war escalation. China warned it would retaliate if such measures were enacted. However, in a post on Truth Social on Sunday, Trump softened his tone, stating that the United States does not want to "hurt China" and that "China's economy will be fine," which slightly eased market concerns.

Meanwhile, the US government shutdown remains unresolved, with no budget deal in sight. The Columbus Day holiday delays any progress until Tuesday, keeping pressure on the US Dollar and supporting risk-sensitive currencies such as the Aussie.

In Australia, the AUD also draws strength from the Reserve Bank of Australia's (RBA) hawkish outlook. The central bank indicated that inflation in the third quarter could exceed earlier projections and that more time is needed to assess the full effects of the cumulative 75 basis points of rate cuts in 2025. This cautious yet firm tone underpins the case for a stronger Aussie.

Investors now turn their attention to the Minutes from the RBA's latest policy meeting, due on Tuesday at 00:30 GMT, which could offer further insight into the central bank's monetary policy trajectory.