Australian Dollar steadies following Trade Balance data

• AUD/USD holds steady as a stronger Australian Dollar was supported by positive domestic Trade Balance data.
• Australia's Trade Balance shifted to a A$3,018M deficit in May, reversing April's surplus.
• The US Dollar remains calm after Fed Chair Kevin Warsh struck a relatively subdued tone at Wednesday's ECB Forum.

AUD/USD inches higher after registering modest losses in the previous day, trading around 0.6900 during the Asian hours on Thursday. The pair holds ground as the Australian Dollar (AUD) remains stronger following the release of domestic Trade Balance data. Traders will closely monitor the US Nonfarm Payrolls figures for June later on Thursday.

Australian Bureau of Statistics (ABS) released on Thursday that the Trade Balance shifted to a deficit of A$3,018M MoM in May, following a surplus of A$1,383M in the previous reading (revised from A$1,791M). The market consensus was for a surplus of A$2,200M. Exports fell by 6.9% MoM in May from a rise of 7.2% seen a month earlier. Meanwhile, Imports rose by 2.6% MoM in May, compared to an increase of 0.2% seen in April (revised from 0.8%).

The AUD/USD pair trades within a tight range as the US Dollar (USD) stabilizes following a relatively subdued appearance by Federal Reserve (Fed) Chair Kevin Warsh at the ECB Forum on Central Banking on Wednesday. Warsh opted not to provide explicit guidance regarding the central bank's upcoming July policy decision. While he acknowledged that inflation remains too elevated and reiterated a firm commitment to the Fed's 2% target and institutional independence, his overall tone was perceived as less hawkish than anticipated. Additionally, Warsh noted a personal preference for winding down the central bank's bond portfolio but emphasized that any adjustments to the balance sheet would only occur after extensive public preparation.

The Greenback could face further headwinds on easing risk aversion amid a wave of optimistic geopolitical developments out of the Middle East. Qatari officials reported "positive progress" in the ongoing negotiations between US and Iranian diplomats regarding a memorandum of understanding, noting that both sides have agreed to continue their dialogue. Reinforcing this positive sentiment, US Vice President JD Vance stated that the discussions in Doha are going well and indicated that formal talks regarding the nuclear issue are expected to commence in the near future.