FX News: RBA Stays Dovish as Commodity Index Slumps – Pressure Builds on AUD (April 2025)

The Reserve Bank of Australia (RBA) held its cash rate steady at 4.10% in April 2025, reiterating a dovish stance amid signs of slowing inflation.

Meanwhile, the RBA’s Commodity Price Index plunged 3.2% in SDR terms, with iron ore and coking coal prices continuing to drag the Australian dollar lower.

This article breaks down the key drivers behind the AUD’s weakness and outlines tactical trade scenarios FX traders should watch going forward.

✅ Key Takeaways for FX Traders

📉 RBA held rates at 4.10%, citing disinflation trends, but remains cautious amid global uncertainty.
⛏️ Commodity Price Index fell 3.2% (SDR) in March, led by iron ore and coal—Australia’s core export sectors.
💱 The AUD is under dual pressure from dovish monetary policy and weaker terms of trade.
♟️ Traders should prepare for multi-scenario outcomes, including a rate cut risk and China’s impact on resource prices.
📊 Key focus areas include upcoming Australian CPI data, Chinese stimulus moves, and U.S. tariff policy.

Table of Contents

📉 Key Drivers in April – Dovish RBA and Falling Commodity Prices
🧭 What the RBA Stance and Commodity Trends Tell Us About the AUD
♟️ AUD Strategy Scenarios for Traders – What to Watch Now
🌏 Market Outlook – Global Risks, China Demand, and U.S. Policy in Focus
🧠 Summary – AUD Faces Structural Pressure; Flexibility Is Key for Traders

📉 Key Drivers in April – Dovish RBA and Falling Commodity Prices

In April 2025, two major macro developments converged to weigh heavily on the Australian dollar (AUD):

The Reserve Bank of Australia (RBA) held its cash rate steady at 4.10%, signaling ongoing disinflation and adopting a notably dovish tone in its statement.
The RBA’s Commodity Price Index dropped 3.2% in SDR terms, reflecting broad weakness in Australia’s key export commodities, particularly iron ore and coking coal.

These twin pressures—monetary policy divergence and deteriorating terms of trade—have renewed bearish sentiment around the AUD across major currency pairs.

📌 RBA Holds at 4.10%, Maintains Dovish Outlook

The RBA noted that inflation has declined substantially since its 2022 peak, attributing this to the impact of higher interest rates on domestic demand.
While underlying inflation continues to ease in line with forecasts, the central bank emphasized a high degree of uncertainty in the economic outlook, especially regarding labor market resilience and global risks such as U.S. tariff policy and geopolitical tensions.

Critically, the statement lacked any hint of future rate hikes. Instead, the RBA reaffirmed that monetary policy remains restrictive and implied that further tightening is unlikely.
This positions the RBA more dovishly relative to other central banks—particularly the Fed and ECB—where the timing and pace of potential rate cuts remain hotly debated.

📉 Commodity Index Falls Sharply – Iron Ore and Coal to Blame

Simultaneously, the RBA’s Commodity Price Index declined by 3.2% in SDR terms and 1.7% in AUD terms for March.
The bulk of this drop came from iron ore and coking coal prices, both of which are critical to Australia’s export revenue and terms of trade.
Spot price-based estimates suggest an even steeper drop—5.2% in SDR terms—highlighting persistent softness in global demand for industrial commodities.

This decline not only pressures Australia’s trade balance but also dampens investor appetite for AUD-denominated assets.
The Aussie dollar, often viewed as a proxy for commodity demand and China’s growth, faces a structurally weaker backdrop in the absence of a rebound in resource prices.

🧭 What the RBA Stance and Commodity Trends Tell Us About the AUD

The Australian dollar has historically been supported by two core pillars:
a relatively high interest rate environment and strong commodity export revenues.
However, both of these supports are now showing signs of erosion, creating a structurally weaker outlook for the AUD in the medium term.

🧭 Australia’s Fundamental Support for the AUD Is Weakening

With the RBA effectively capping its tightening cycle, the interest rate differential that once made the AUD attractive in carry trades is fading.
At the same time, while the central bank insists its current stance is “restrictive,” its dovish tone puts it out of step with global peers still maintaining a hawkish bias or delaying rate cuts.

In parallel, Australia’s top export commodities—iron ore, coking coal, LNG—are facing price headwinds.
This double bind means that the AUD is no longer benefiting from the “yield plus resource boom” narrative that defined its strength in past cycles.

The result? Lower inflows into AUD assets, deteriorating terms of trade, and increased vulnerability to external shocks.

💡 The Traditional “High Yield + Resources” Narrative Is Breaking Down

The AUD has long been viewed as a barometer for:

Asia-Pacific growth, especially China’s industrial demand
Global commodity cycles
Risk sentiment in broader financial markets

However, recent developments suggest that this narrative needs to be re-evaluated:

Driver	Current Status	Implication for AUD
RBA Policy	Dovish, on hold	Limits upside from rate differentials
Commodity Prices	Declining	Weakens trade surplus & investor confidence
China Outlook	Uncertain	Dampens AUD’s proxy appeal

Unless we see a reversal in either monetary tone or resource prices, the AUD could remain stuck in a structurally weak position, unable to regain sustained bullish momentum.

♟️ AUD Strategy Scenarios for Traders – What to Watch Now

In a macro environment where monetary policy is on pause and commodity prices are sliding, the Australian dollar (AUD) lacks a clear bullish catalyst.
For FX traders, this means strategic flexibility is key—not just reacting to headlines, but preparing for multiple market paths.

Here, we outline three plausible scenarios and how traders might position accordingly.

⚖️ Baseline Scenario: Sideways Bias With Bearish Tilt

Assumptions:

RBA keeps rates unchanged, with no strong forward guidance
Commodity prices stabilize but don’t rebound
Global risk sentiment remains mixed

Strategy Implication:

Expect AUD/USD and AUD/JPY to remain range-bound, but with a downward drift
Focus on sell-on-rally opportunities, especially near technical resistance levels (e.g. 0.6550 in AUD/USD)
Shorter-term momentum trades favored, as macro signals may remain inconclusive

🔻 Bearish Scenario: Risk-Off + RBA Pivot = AUD Short Setup

Assumptions:

Australian CPI and labor data weaken
RBA signals a potential rate cut in late Q2 or Q3
China demand falters further; iron ore drops below key support levels

Strategy Implication:

AUD/USD could revisit 0.63 or lower, with risk of further capitulation toward 0.61
AUD/NZD short becomes attractive if the RBNZ maintains its hawkish bias
Higher beta cross pairs (e.g., AUD/JPY, AUD/CAD) could see accelerated downside during risk-off episodes

🔼 Bullish Scenario: China Rebound + Risk-On Sentiment

Assumptions:

Chinese stimulus gains traction, boosting commodity demand
U.S. rate cut expectations grow, weakening the dollar
Global equities recover, improving risk sentiment

Strategy Implication:

AUD/USD could break above 0.66, targeting 0.6750
AUD/JPY long becomes viable in a global reflation trade
Traders may rotate into AUD/CAD or AUD/CHF as pro-cyclical bets

🧠 Bottom Line for Traders

Rather than anchoring to a fixed AUD view, traders should:

Monitor CPI, labor data, and RBA forward guidance for directional cues
Watch commodity price action, particularly in iron ore and LNG
Stay agile across cross-AUD pairs, adjusting exposure as macro conditions evolve

🌏 Market Outlook – Global Risks, China Demand, and U.S. Policy in Focus

The Australian dollar is highly sensitive to external macro forces, and April 2025 presents no shortage of potential volatility drivers.
While domestic data will guide the RBA’s stance, the real catalysts may come from abroad—particularly China, the U.S., and global risk sentiment.

🇦🇺 Domestic Data Will Guide the RBA’s Next Move

Even though the RBA held rates in April, future policy decisions hinge on key incoming data:

CPI figures (April and May) will determine if disinflation is sustained
Labor market reports will show whether wage growth is cooling
Household spending trends and business confidence may hint at recession risks

If inflation slows faster than expected or the labor market softens, markets may begin pricing in an RBA rate cut as early as Q3.

🇨🇳 China’s Policy Support Could Shift Commodity Sentiment

As Australia’s largest trading partner, China remains the single most important external variable for the AUD:

Beijing’s fiscal and credit stimulus efforts have had limited traction so far
Industrial demand remains weak, particularly in steel and construction
Any positive surprise in Chinese PMIs or infrastructure spending could reverse the commodity downtrend

A meaningful rebound in China-linked commodities—iron ore, coking coal, LNG—would be a bullish trigger for the AUD, especially vs. USD or JPY.

🇺🇸 U.S. Tariff Policy and Geopolitical Risks Cloud the Outlook

Beyond China, global sentiment hinges on the U.S. policy trajectory and broader geopolitical stability:

The White House recently confirmed new tariffs may be enacted immediately, which could dent global trade and risk appetite
Geopolitical tensions in Eastern Europe, the Middle East, and East Asia remain elevated
If risk-off flows increase, high-beta currencies like the AUD typically underperform

Additionally, U.S. data surprises—particularly on inflation or employment—could reset the dollar narrative and affect AUD/USD directly.

🔮 Outlook Summary

The AUD’s next directional leg will likely be driven by a confluence of domestic and external forces, including:

Australia’s inflation and wage trends
China’s demand cycle and stimulus effectiveness
U.S. monetary and trade policy surprises
Global risk sentiment and capital flows

For traders, this means staying nimble and ready to shift positioning quickly as the global macro narrative evolves.

🧠 Summary – AUD Faces Structural Pressure; Flexibility Is Key for Traders

The Australian dollar is under mounting pressure from both domestic fundamentals and global macro shifts.
With the RBA turning increasingly cautious and Australia’s key export commodities losing value, the traditional drivers that once supported AUD strength are eroding.

🧩 Key Takeaways

RBA holds rates at 4.10%, but adopts a dovish tone, dimming hopes for further tightening.
Commodity prices continue to slide, led by iron ore and coking coal—core pillars of Australia’s trade balance.
China’s economic trajectory remains uncertain, reducing the AUD’s proxy appeal for Asia growth.
Global risks are rising, with U.S. tariffs and geopolitical events threatening broader market stability.

Together, these factors point to a fragile outlook for the AUD, particularly against safe-haven and high-yield currencies.

🧠 Strategic Implication for FX Traders

For traders, the key is not to pick sides too early—but to remain tactically flexible. Here’s what that looks like in practice:

Market Phase	AUD Strategy
Range-bound markets	Sell rallies, especially near technical resistance zones
Macro deterioration	Short AUD/USD and AUD/JPY, target deeper downside
Positive China signals	Consider reversal longs in AUD/NZD or AUD/CAD

With the AUD now driven more by macro divergence and commodity flows than central bank policy alone, traders must adjust their playbook accordingly.

The next few weeks will be critical. Keep your focus on: