AUD/USD edges lower despite strong Australia jobs report

• AUD/USD slips to near 0.6400 during the European session on Thursday.
• Australia adds 89K fresh jobs in April; unemployment rate remains steady at 4.1%.
• Upbeat data trims RBA easing bets, but markets still price in a 25 bps interest rate cut on Tuesday.

The Australian Dollar (AUD) edges lower, retreating to near 0.6400 against the US Dollar (USD) at the time of writing on Thursday, erasing early Asian session gains following a stellar Australian jobs report.

The Australian Bureau of Statistics (ABS) reported the economy added 89,000 jobs in April, sharply beating consensus forecasts of a 20,000 increase, and well above March’s upwardly revised 36,400 gain. The Unemployment Rate held steady at 4.1%, in line with expectations. 

The pair had initially jumped during the Asian session, supported by strong labour data. However, the bullish momentum faded after AUD/USD failed to hold above the key 0.6450 psychological barrier, triggering a pullback as traders reassessed the broader market backdrop.

This report signals that Australia’s labor market remains tight, providing the Reserve Bank of Australia (RBA) with less impetus to lower interest rates in the near term. The recent easing of US-China trade tensions, which has helped calm fears of a global recession, also reduces pressure on the RBA to deliver aggressive monetary support. Nonetheless, markets continue to expect a 25 basis point (bps) interest rate cut at the central bank’s upcoming policy meeting on Tuesday, which would bring the Official Cash Rate (OCR) down to 3.85% from 4.10%.

On the geopolitical front, China announced on Wednesday that it will suspend certain non-tariff countermeasures on United States (US) entities for 90 days, following a bilateral agreement over the weekend to reduce tariffs. This marks another step toward de-escalation in the prolonged US-China trade dispute, improving global market sentiment.

Despite these tailwinds, AUD/USD remains under pressure, weighed down by a resilient US Dollar. The US Dollar Index (DXY), which tracks the USD against a basket of six major currencies, is holding firm above the 100.00 mark, as traders await the release of US Retail Sales and Producer Price Index (PPI) data for April, due later on Thursday. These reports, along with a scheduled speech from Federal Reserve (Fed) Chair Jerome Powell, could further clarify the Fed’s policy stance and influence near-term USD direction.