Australian Dollar declines as US employment figures lessen hopes for a Fed rate reduction

• Australian dollars drop against the US dollar as positive US employment data dampens chances for a Federal Reserve interest rate reduction.
• The House of Representatives has approved President Trump’s significant tax reform bill and forwarded it for his signature.
• Non-farm payrolls in the U.S. surpassed expectations with an addition of 147,000 jobs in June, exceeding the projected 110,000.

The Australian Dollar (AUD) is poised to lose further value against the US Dollar (USD) on Friday. This decline is overshadowing investor expectations for potential interest rate cuts from the Federal Reserve, fueled by robust employment growth and unexpected decreases in unemployment rates.

U.S. Non-farm payrolls (NFP) took center stage on Thursday, with a shortened reporting week due to the Independence Day holiday. The market is clearly grappling with broader trends, hindered by political and financial uncertainties. Strong job figures typically bolster the US dollar, which might present downward pressure on the AUD/USD pair.

In a recent statement, China’s Commerce Department mentioned that the U.S. and China are ramping up efforts to apply the outcomes of the London framework. The U.S. noted that China has lifted some export restrictions. Consequently, China is currently assessing applications for export licenses linked to regulated items.

Investors are awaiting monthly household expenditure data from Australia, expected later today. Attention will soon turn to the Reserve Bank of Australia (RBA) Monetary Policy Conference planned for next week. Market forecasts suggest a 25 basis point rate cut, lowering the cash rate to 3.60%.

Australian Dollar Declines Following Labor Market Insights

• The US Dollar Index (DXY), measuring the USD against six primary currencies, is trading around a low of 97.00 currently. Traders have clarified President Trump’s tariff strategies with various nations.
• On Thursday, Trump remarked to reporters: “We’ll begin sending out letters regarding trade tariffs starting Friday.” He detailed that, according to Reuters, the tariff rates will be set between 20% and 30% and that notifications will be dispatched to 10 countries at a time.
• Trump’s significant tax reform bill has passed the House and is awaiting his signature. The legislation features substantial tax reductions aimed at spurring economic growth. Trump described the passage of the True Society bill as “a historic win for American families, businesses, and workers.”
• The NFP report indicated an increase in the U.S. workforce with 147,000 jobs added in June, surpassing the anticipated 110,000. Additionally, the unemployment rate dipped from 4.2% to 4.1%. Meanwhile, weekly jobless claims decreased to 233,000 from 237,000, a sign of a resilient U.S. labor market.
• In June, changes in U.S. ADP employment dipped for the first time in over two years, with private sector payrolls falling by 33,000 after a downward revision of previous gains in May. This figure was below the market consensus of 95,000.
• U.S. ISM Manufacturing PMI increased to 49.0 from 48.5 in May, exceeding the expected 48.8. This highlights an uptick in economic activity in the U.S. manufacturing sector for June. Additionally, job openings in the U.S. rose to 7.76 million in May, surpassing the previously reported 7.395 million in April.
• In China, the Caixin Services PMI dropped from 51.1 in May to 50.6 in June, falling short of the market forecast of 51.0. However, the purchasing managers’ index for Kaisin manufacturing in China improved from 48.3 in May to 50.4 in June, surpassing market expectations of 49.0.
• The Australian Bureau of Statistics (ABS) reported a narrowing trade deficit in May to 2,238 million AUD from 5,091 million AUD in April (revised). Exports fell by 2.7% month-on-month, while imports increased by 3.8% month-on-month.
• The S&P Global Australia Composite Purchasing Managers’ Index (PMI) rose to 51.6 in June from 50.5, marking the fastest growth pace since March. Meanwhile, the service PMI increased from 50.6 to 51.8, the highest expansion rate since May 2024.
• The ABS indicated a monthly increase of 0.2% in May compared to a flat 0% (revised from -0.1%). Building permits rose by 3.2% in May, contrasting with a previous decline of 4.1%, although it still fell short of the expected 4.8% increase.
• Australia’s S&P Global Manufacturing Purchasing Managers’ Index (PMI) declined to 50.6 from 51.0 in June, falling to its lowest level since February due to sufficient client inventory and weak market conditions.

The Australian Dollar Falls Short of Its Eight-Month High of Nearly 0.6600

The AUD/USD is trading around 0.6570 this Friday. Technically, current analysis suggests a generally bullish sentiment, as the pair is moving upward within a rising channel pattern. The 14-day relative strength index (RSI) remains above the 50 threshold, supporting positive sentiment. Additionally, the pair remains above the nine-day exponential moving average (EMA), indicating strong short-term price momentum.

On the flip side, the AUD/USD could potentially retest its eight-month peak of 0.6590 established on July 1st. If this level is breached, support could strengthen, allowing for a test of the upper boundary around 0.6660.

A critical support level appears at 0.6553 with the nine-day EMA. A break below this could weaken short-term price momentum, placing downward pressure on the AUD/USD and testing the lower limit of the upward channel near 0.6500, which aligns with the 50-day EMA at 0.6470.

AUD/USD: Daily Overview

The table below reflects the rate of change in the Australian Dollar (AUD) against major currencies today. The Australian dollar currently registers as the weakest against the Japanese yen.

The heatmap illustrates the changes in major currencies’ rates. The base currency is on the left, and the estimated currency on top. For instance, selecting Australian dollars and then moving horizontally to USD, the rate displayed reflects AUD/USD.