Aussie dollar edges higher overnight as US rate cut bets weaken greenback
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Daily Currency Update
Overnight, the Australian dollar recorded a modest gain against the US dollar, rising to approximately US$0.6474, reflecting a continuation of its gradual upward trend in recent weeks. This movement was primarily driven by broad-based US dollar weakness, as investors increasingly anticipate interest rate cuts from the Federal Reserve amid mounting signs of a slowing US economy. Softer-than-expected US labor market data and a general shift in investor sentiment toward risk-sensitive assets also helped lift demand for the Aussie. Although the overnight gain was relatively small—around 0.11%—it underscored the resilience of the AUD in a global environment, marked by monetary policy uncertainty and shifting risk dynamics. Looking ahead, the outlook for the Australian dollar remains cautiously optimistic in the short to medium term. Forecasts suggest a gradual appreciation, with the AUD potentially reaching the 0.655 to 0.70 range by late 2025, supported by ongoing US dollar softness and Australia’s strong trade position. Technical momentum remains favourable, provided the currency holds above key support thresholds. However, several headwinds could limit upside potential, including the likelihood of interest rate cuts by the Reserve Bank of Australia, renewed geopolitical or trade tensions—particularly between the US and China—and any deterioration in global risk sentiment. While the near-term trajectory appears constructive, the Australian dollar’s longer-term performance will remain closely tied to both domestic policy settings and broader macroeconomic trends.Key Movers
Overnight, the US Dollar Index (DXY) experienced a modest decline, closing at 99.1410, after reaching a daily high of 98.9560 and dipping to a low of 98.6030. This slight pullback reflects growing market expectations that the Federal Reserve may soon begin cutting interest rates, prompted by mounting evidence of a cooling US economy and dovish signals from Fed officials. Despite the decline, the DXY remains comfortably above the 98.00 level, demonstrating underlying resilience amid ongoing volatility. The index’s movement continues to be shaped by key economic data releases and evolving Fed policy outlooks, with investors closely watching for any fresh indications on the trajectory of future monetary policy adjustments. In related news, China’s trade surplus for July 2025 narrowed significantly to $98.24 billion, down from $114.77 billion in June. This reduction was largely driven by a sharp 21.67% drop in exports to the United States, a direct consequence of recently imposed US tariffs. Nevertheless, China’s overall exports still grew by 7.2% year-on-year, buoyed by stronger shipments to Southeast Asia and other alternative markets. Additionally, imports surprised analysts by rising 4.1%, defying earlier expectations of a contraction. Despite the shrinking surplus, China’s trade figures for July highlight the country’s resilience amid ongoing global trade tensions. The noticeable shift in export destinations, combined with increased import activity, points to strategic efforts to diversify trade partnerships and bolster domestic demand. However, with the US-China tariff truce set to expire on August 12, further uncertainties loom over the trade outlook, potentially adding volatility to global markets in the near term.Expected Ranges
- AUD/USD: 0.6400 - 0.6600 ▲
- AUD/EUR: 0.5500 - 0.5700 ▲
- GBP/AUD: 2.0500 - 2.0700 ▼
- AUD/NZD: 1.0800 - 1.1000 ▲
- AUD/CAD: 0.8850 - 0.9050 ▼