Aussie dollar trades lower with volatility tied to geopolitical tensions and shifting risk appetite

Daily Currency Update

The Australian dollar is weaker this morning against the Greenback trading at 0.6423 at time of writing. Over the last week the Aussie dollar lost roughly 0.6% versus USD with volatility tied to geopolitical tensions and shifting risk appetite. The AUD peaked around 0.655 driven by improved trade sentiment, particularly ahead of US–China discussions, and a strong Chinese trade surplus. Last week, China reported a stronger-than-expected trade surplus, driven largely by rising exports to countries like the U.S., Southeast Asia, and Europe and weaker imports reflecting subdued domestic demand. A strong Chinese trade surplus is bullish for the Australian dollar, as it implies stronger Chinese demand, a vital driver for Australia’s export-heavy economy. That’s part of why the AUD briefly strengthened before geopolitical tensions took over. On the local front last week Australian employment dipped in May after solid gains the previous month, though full-time jobs jumped and the jobless rate held steady in a sign of continued resilience in the labour market. Figures from the Australian Bureau of Statistics showed net employment dipped 2,500 in May from April, when they rose a revised 87,600. That was below market forecasts for a 22,500 increase, though the series has been very volatile in recent months. The jobless rate held at 4.1%, where it has been for over a year now. The participation rate dipped slightly to 67.0%. There was little market reaction as the report did not move the dial on policy easing expectations from the Reserve Bank of Australia. Swaps imply a 65% probability for a quarter-point rate cut in July, the same as before.