Softening labour markets drive AUD lower
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Daily Currency Update
The Australian dollar fell through trade on Thursday, giving up US$0.65 amid weaker domestic employment data and stronger than expected US macroeconomic data. Monthly employment data was weaker than anticipated, with employment growth flat and the unemployment rate rising to 4.3%. The print buttressed calls for the RBA to lower rates in August, with a 25-basis point rate reduction now fully priced in. The AUD slipped below US$0.65 in the moments following the release and has sustained the downturn through overnight trade. A string of US data points printed above expectations, headlined by a 0.6% uptick in retail sales, well above market estimates of 0.1%. With weekly jobless claims lower and June net import prices printing below expectations, pressure for the Fed to lower rates eased, at least in analysts’ minds. In the moments following the data releases, President Trump took to Truth Social, imploring the Fed to “LOWER THE RATE!!!”. The President seems bent on pursuing his campaign to discredit the Fed and bend its members to his will, which, at least for now, seems to be failing. Key Fed officials hit the wires Thursday, affirming the Fed's commitments to maintaining price stability and maximum employment, suggesting no rate change is required at this time and may not be appropriate through the rest of 2025. With the US and Australian rates diverging, the AUD slid to intraday lows at US$0.6456 before finding support and edging back toward US$0.6486 leading into this morning's open.Our attention now turns to Japan CPI numbers and US consumer sentiment data for direction into the weekly close.
Key Movers
The US dollar strengthened Thursday, buoyed by a string of stronger data sets, headlined by a surge in retail sales. The DXY index jumped a quarter percent, recouping all the losses suffered in the wake of the weeks earlier Fed credibility scare. Markets have fully recovered from the damage that came after reports emerged that the President was considering firing Fed chair Jerome Powell, yet the President’s tirade against the Fed seems far from over. Trump took to Truth Social in the hours after the day's data releases, imploring policy makers to “LOWER THE RATE!!!”. In any normal environment, the stronger data sets coupled with evidence of rising inflation would prompt discretion and a measured approach to future policy, but that is simply not the reality under this administration. Through Thursday evening, Kevin Warsh, a front-runner to succeed Jerome Powell as Fed Chair, appeared on CNBC, suggesting the Fed’s hesitancy in lowering rates had sparked a crisis of credibility. Warsh went on to say the President is completely justified in pushing the Fed publicly. While Warsh did qualify his remarks, affirming his belief in Fed Independence, the comments add another layer of uncertainty in an already volatile market.In other news UK employment data showed the unemployment rate jumped to 4.7% in the three months through May, a four-year high. With wages and inflation moderating, calls for the Bank of England to lower rates in August amplified, and markets have now priced a 90% probability of a rate cut.
Our attentions today turn to Japanese CPI data and US consumer sentiment numbers as the major macro items on the agenda, while US trade policy and political headlines continue to steer sentiment.
Expected Ranges
- AUD/USD: 0.6450 - 0.6580 ▼
- AUD/EUR: 0.5550 - 0.5630 ▼
- GBP/AUD: 2.0500 - 2.0800 ▲
- AUD/NZD: 1.0900 - 1.1000 ▼
- AUD/CAD: 0.8880 - 0.8980 ▼