- The Australian dollar is expected to weaken as employment changes came in at -5.4k in August, significantly below the anticipated 22K.
- The unemployment rate in Australia held steady at 4.2% in August, meeting projections.
- Strong inflation expectations are dampening hopes for extensive rate cuts by the Federal Reserve, bolstering the US dollar.
The Australian dollar (AUD) is poised to decline against the US dollar (USD) on Thursday following the release of domestic labor market figures. The AUD/USD exchange rate is also feeling the pressure, primarily due to the USD gaining traction from optimistic inflation forecasts which have tempered expectations for more significant cuts by the Federal Open Market Committee (FOMC).
In August, seasonally adjusted employment changes in Australia dropped to -5.4k, a decline from a revised figure of 26.5k (initially 24.5k) in July and missing the consensus prediction of 22K. Meanwhile, the unemployment rate held at 4.2%, as anticipated.
On another note, the US and China struck a deal on Monday regarding the transfer of TikTok to US ownership. Traders are keenly awaiting the next developments, with a critical call expected Friday between US President Donald Trump and Chinese President Xi Jinping.
The Australian dollar is set to drop as the US dollar climbs following the Fed’s decision
- The US Dollar Index (DXY), which reflects the value of the US dollar against six major currencies, was around 97.10 at this point and remained in motion. Traders will eye the US weekly unemployment claims data released later today.
- The Federal Reserve implemented a 25 basis point cut to its funding rate, marking its first reduction of the year, with a possibility of an additional 50 basis points cut anticipated by year-end, slightly exceeding the June forecasts.
- Federal Reserve Chairman Jerome Powell noted signs of growing weakness in the labor market, explaining the need to stabilize rates following a period of concerns over inflation linked to tariffs.
- US retail sales saw an increase of 0.6% in August, better than the expected 0.2%, following a revised increase of 0.6% in July. Both the Retail Sales Control Group and Retail Sales Ex Autos were up by 0.7%, surpassing the expected 0.4% gain.
- The National Bureau of Statistics (NBS) reported that China’s retail sales were anticipated to rise by 3.8% in July, and 3.7% in August, compared to a 3.4% year-on-year increase. Meanwhile, year-on-year industrial production growth in China was reported at 5.2%, lower than the expected 5.8% and last month’s 5.7%.
- During a press conference, the NBS remarked that while economic conditions in August were generally stable, domestic demand is expected to grow, indicating potential for price rebounds amidst a challenging external environment for some businesses.
- Sarah Hunter, a Reserve Bank of Australia (RBA) aide, mentioned that the bank is “close to targeting inflation” and emphasized the importance of a future-oriented approach given the delayed effects of monetary policy. She added that the RBA is closely tracking the fundamental strength of consumer spending to move toward full employment.
- The Australian dollar is currently finding some support, particularly with potential hints of no further cuts from the RBA. Currently, expectations for an unchanged policy in September are around 70%, buoyed by a sizable trade surplus in July, solid Q2 GDP, and elevated inflation in July. Moreover, consumer inflation expectations have also risen in September, stoking concerns about new inflationary pressures.
Australian dollar drops below 0.6650 after retreating from 11-month highs
AUD/USD is trading around 0.6640 on Thursday. Analyzing the daily charts indicates that the pair typically trends higher within rising channels, suggesting a bullish outlook. The short-term momentum appears promising as prices have surpassed the nine-day index moving average (EMA).
On the flip side, the AUD/USD pair is targeting a psychological threshold of 0.6700, reached on September 17th, previously reaching 0.6707—an 11-month peak. A breach above this point could test the upper boundary of the ascending channel near 0.6720.
Initial support for the AUD/USD may appear at the nine-day EMA, which stands at 0.6632, followed by a lower boundary of around 0.6590. A drop beneath this channel could weaken the bullish sentiment and prompt a test of the 50-day EMA at 0.6544.
AUD/USD Daily Charts
The current fluctuation in the Australian dollar (AUD) against major currencies is outlined in a table. The AUD is currently the weakest against the USD.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.20% | 0.34% | 0.24% | 0.15% | 0.47% | 0.94% | 0.23% | |
| EUR | -0.20% | 0.01% | 0.07% | -0.03% | 0.25% | 0.85% | 0.07% | |
| GBP | -0.34% | -0.01% | 0.04% | -0.06% | 0.22% | 0.75% | 0.05% | |
| JPY | -0.24% | -0.07% | -0.04% | -0.09% | 0.16% | 0.68% | 0.03% | |
| CAD | -0.15% | 0.03% | 0.06% | 0.09% | 0.31% | 0.94% | 0.10% | |
| AUD | -0.47% | -0.25% | -0.22% | -0.16% | -0.31% | 0.62% | -0.19% | |
| NZD | -0.94% | -0.85% | -0.75% | -0.68% | -0.94% | -0.62% | -0.68% | |
| CHF | -0.23% | -0.07% | -0.05% | -0.03% | -0.10% | 0.19% | 0.68% |
This heatmap illustrates the variations among major currencies, with the base currency in the left column and the estimated one along the top. Specifically, the rate of change reflects the value of AUD against USD.
