Australian dollar slumps as rate cut bets and stronger USD weigh on market
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Daily Currency Update
Last week, the Australian dollar (AUD) broadly underperformed against major currencies, finishing the week lower. AUD/USD fell sharply, pressured by renewed expectations of interest rate cuts from the Reserve Bank of Australia (RBA) following softer-than-expected labour data and a rise in unemployment. At the same time, the US dollar gained strength ahead of a key Federal Reserve policy meeting, further weighing on the Aussie. The AUD also struggled against the euro and the pound, despite weakness in those currencies, as domestic economic concerns amplified the decline. By Friday, AUD/USD had slipped into the US$0.6515–0.6535 range, reflecting risk-off sentiment, subdued inflation data, and growing speculation about imminent RBA rate cuts. Overall, the Aussie closed the week weaker across most of its major pairings. Looking ahead, this week’s focus will be on Australia’s Q2 inflation figures and June retail sales, as well as key updates from the RBA and global data that could influence sentiment. On Wednesday, the Australian Bureau of Statistics (ABS) will release the latest CPI data, with markets expecting around 0.7% quarterly growth and trimmed-mean inflation near 2.7% annually. A softer print would likely strengthen market expectations for a near-term rate cut by the RBA. Midweek, the RBA’s meeting minutes will offer insight into the central bank’s current policy stance and outlook for inflation and employment. Later in the week, retail sales data will provide a snapshot of consumer demand, with a stronger-than-expected result potentially lending support to the AUD. Internationally, all eyes will be on Friday’s U.S. non-farm payrolls report—robust jobs data could boost the USD and weigh on AUD/USD, while a weaker print might ease pressure on the Aussie.Key Movers
The US dollar experienced significant volatility last week, initially strengthening by 1.5%, its most substantial gain since November 2024, following a series of positive economic indicators. However, this upward momentum was abruptly halted on Friday by a disappointing July jobs report, which revealed a mere 73,000 new jobs added and downward revisions to prior months. This data prompted a sharp 1.3% drop in the US dollar Index (DXY) in a single day, reigniting concerns about a potential economic slowdown and increasing pressure on the Federal Reserve to consider more aggressive rate cuts. Investor sentiment was further impacted by President Donald Trump's announcement of new tariffs on imports from several countries, including Canada, South Korea, and India, ranging from 10% to 41%. While some analysts viewed these measures as a strategic move to negotiate better trade terms, others warned of potential inflationary pressures and strained international relations. Despite these challenges, the US economy showed resilience, with a 3% GDP growth in Q2 and subdued inflation. However, the combination of weak employment data and escalating trade tensions has left investors cautious, leading to a cooling of the dollar's earlier gains. Looking ahead, the Federal Reserve's response to the economic data will be crucial. Speculation is growing that the Fed may implement rate cuts larger than the typical 0.25%, especially if next month's figures remain weak. The dollar's performance will likely continue to be influenced by these developments, as well as by ongoing global economic uncertainties.Expected Ranges
- AUD/USD: 0.6350 - 0.6550 ▼
- AUD/EUR: 0.5450 - 0.5650 ▼
- GBP/AUD: 2.0400 - 2.0600 ▲
- AUD/NZD: 1.0800 - 1.1000 ▲
- AUD/CAD: 0.8800 - 0.9000 ▼