The Australian Dollar (AUD) edged higher against the US Dollar (USD) on Thursday, rebounding from losses in the previous session as easing global trade tensions and robust domestic employment data bolstered investor confidence in the risk-sensitive currency.
The AUD/USD pair climbed toward 0.6440, regaining momentum after a 0.50% decline a day earlier. Market sentiment turned positive following reports of a breakthrough in US-China trade negotiations, reducing recession fears and fueling demand for high-beta currencies such as the Aussie.
Australian Labor Market Surprises to the Upside
Australia’s labor market delivered an unexpected boost to the currency. According to the Australian Bureau of Statistics (ABS), employment surged by 89,000 in April, more than doubling March’s 36,400 figure and significantly outpacing the forecasted 20,000 gain. The unemployment rate held steady at 4.1%, underscoring the resilience of the labor market.
Further supporting the Australian economy, the Wage Price Index rose 3.4% year-over-year in Q1 2025, up from 3.2% in the previous quarter and above market expectations. Quarterly wage growth reached 0.9%, surpassing the projected 0.8% increase. These figures mark a rebound from the weakest wage growth since Q3 2022.
Global Trade Progress Boosts Risk Appetite
Market optimism was buoyed by a preliminary trade agreement between the United States and China during weekend talks in Switzerland. Under the deal, the US will reduce tariffs on Chinese goods from 145% to 30%, while China will cut tariffs on US imports from 125% to 10%. The easing of trade hostilities is seen as a significant step toward resolving long-standing economic frictions.
In a separate geopolitical development, senior Iranian official Ali Shamkhani stated that Iran is prepared to sign a nuclear agreement with US President Donald Trump, which includes a pledge never to develop nuclear weapons in exchange for the lifting of US sanctions. The news helped to further stabilize global sentiment.
US Dollar Pressured by Soft Economic Indicators
The US Dollar Index (DXY) fell to around 100.90 as investors weighed softer inflation data and shifting expectations for Federal Reserve policy. April’s Consumer Price Index (CPI) rose 2.3% year-over-year, slightly below the 2.4% forecast, while core CPI remained steady at 2.8%. Both measures rose 0.2% month-over-month.
Expectations for Fed rate cuts have moderated in response to easing trade concerns. According to LSEG data, markets now see a 74% chance of a 25-basis-point cut in September—down from earlier expectations for a July move.
President Trump told Fox News that US-China relations are “excellent” and expressed his willingness to engage directly with President Xi Jinping, further calming market nerves.
In contrast, China’s economic indicators remain soft. April’s Consumer Price Index declined 0.1% year-over-year, in line with expectations, while the Producer Price Index dropped 2.7%, deeper than March’s 2.5% decline.
RBA Outlook and Political Stability Support AUD
Despite global central banks moving toward easing, expectations for aggressive rate cuts by the Reserve Bank of Australia (RBA) have receded. Markets now anticipate the RBA will lower the cash rate to around 3.1% by year-end, revising earlier projections of 2.85%. However, a 25-basis-point cut remains likely at the next policy meeting.
Adding to domestic stability, Australian Prime Minister Anthony Albanese secured a second term in office following a decisive election victory. Key cabinet positions remain unchanged. Albanese is set to attend the inauguration of Pope Leo XIV in Rome, where he will meet European leaders to discuss trade policy.
Technical Outlook: AUD/USD Eyes December Highs
Technically, the AUD/USD pair shows bullish momentum, trading above the nine-day Exponential Moving Average (EMA) with the 14-day Relative Strength Index (RSI) holding above the neutral 50 level.
Immediate resistance lies near 0.6515, the six-month high recorded in December 2024. A break above this level could open the path to the seven-month high of 0.6687 reached in November.
Support is seen around the nine-day EMA at 0.6429, followed by the 50-day EMA near 0.6355. A decisive drop below these levels may shift the outlook bearish, potentially driving the pair toward 0.5914—last seen in March 2020.
Investors will turn their focus to upcoming US Retail Sales and Producer Price Index data for further cues on Fed policy and short-term direction for the AUD/USD.
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