Aussie dollar experiences slight volatility as market eyes US Fed policy and Australian economic data
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Daily Currency Update
Last week, the AUD/USD exchange rate experienced moderate fluctuations, reflecting a cautious market environment shaped by ongoing global economic developments. The Australian dollar opened at approximately 0.6538 USD on September 1 and gained modest strength over the following two days, reaching a short-term peak near 0.6545 USD on September 3. However, this upward momentum proved short-lived, as the currency pair gradually retreated to close the week around 0.6516 USD on September 5. These movements were primarily driven by market speculation regarding potential shifts in U.S. Federal Reserve monetary policy. Investors closely watched for signals of an interest rate cut or a pause in tightening measures, while fluctuations in U.S. Treasury yields further influenced risk sentiment and capital flows. This dynamic underscored the AUD/USD pair’s sensitivity to broader macroeconomic trends and central bank guidance, with traders remaining vigilant to economic data and policy developments throughout the week.Domestically, Australia’s economy is showing signs of resilience. In the second quarter of 2025, real GDP expanded by 0.6% quarter-on-quarter and 1.8% year-on-year, marking the fastest annual growth in nearly two years. This acceleration was largely driven by a surge in household consumption, supported by three interest rate cuts from the Reserve Bank of Australia (RBA) since February. Despite this positive momentum, underlying challenges persist, including weak business investment and a cooling labor market, which may prompt further monetary easing. Inflation dynamics are also playing a key role in shaping the AUD’s trajectory. July’s Consumer Price Index (CPI) rose to 2.8%, exceeding expectations and casting doubt on the likelihood of an imminent RBA rate cut. This unexpected inflation increase has introduced uncertainty into the central bank’s policy outlook.
Key Movers
The United States Bureau of Labor Statistics (BLS) reported on Friday that Nonfarm Payrolls (NFP) increased by just 22,000 jobs in August, a figure that fell significantly short of market expectations. This modest gain followed a revised increase of 79,000 jobs in July, which was an upward adjustment from the initially reported 73,000. Economists had anticipated a more robust job creation number of around 75,000 for August, making the actual figure a notable miss. The report also highlighted a slight rise in the Unemployment Rate, which inched up to 4.3% from 4.2% in July, aligning with analyst forecasts. Meanwhile, the Labor Force Participation Rate—a measure of the proportion of the working-age population actively engaged in the labor market—experienced a small uptick to 62.3% from 62.2%, indicating a marginal increase in workforce engagement. Additionally, annual wage inflation, as gauged by the change in Average Hourly Earnings, softened slightly, declining to 3.7% year-over-year from 3.9% in the previous month. This slowdown in wage growth suggests easing pressure on labor costs, which could influence the Federal Reserve’s future monetary policy decisions. Overall, the August jobs report painted a picture of a cooling labor market, raising questions about the pace of economic growth and prompting speculation about potential adjustments in interest rates by the central bank.Expected Ranges
- AUD/USD: 0.6450 - 0.6650 ▲
- AUD/EUR: 0.5500 - 0.5700 ▲
- GBP/AUD: 2.0550 - 2.0750 ▼
- AUD/NZD: 1.1000 - 1.1200 ▲
- AUD/CAD: 0.8950 - 0.9150 ▲