AUD/USD trades lower as US Dollar firms ahead of delayed US NFP data
- AUD/USD stays under pressure as the US Dollar firms ahead of key US data releases.
- Markets await delayed US NFP reports for clues on the Fed’s monetary policy outlook.
- RBA policy repricing and weak China data add pressure on the Aussie.
AUD/USD remains under pressure on Monday, with the Australian Dollar (AUD) edging lower as the US Dollar (USD) stages a modest rebound ahead of a heavy US economic docket due on Tuesday. At the time of writing, AUD/USD is trading around 0.6637, staying on the back foot for a third consecutive day.
Meanwhile, the US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, is hovering near 98.34, rebounding after hitting an intraday low around 98.14.
Earlier in the American trading session, the Greenback came under brief pressure after the US New York Empire State Manufacturing Index pointed to a sharp slowdown in activity. The index fell to -3.9 in December from 18.7 in November, missing market expectations of 10.6.
Looking ahead, investors are repositioning ahead of the delayed US Nonfarm Payrolls (NFP) reports for October and November, which were postponed due to the recent government shutdown. The data will be closely watched as markets continue to reassess the Federal Reserve’s (Fed) monetary policy outlook following last week’s 25 basis point (bps) interest rate cut.
Policymakers acknowledged that downside risks to employment have increased in recent months, and a weaker-than-expected labour-market reading would likely reinforce expectations for further policy easing, even as Fed Chair Jerome Powell cautioned against near-term rate cuts, stressing that future policy decisions will hinge on incoming data.
In addition to the NFP releases, traders will also monitor the ADP Employment Change four-week average, Retail Sales, and preliminary S&P Global Purchasing Managers Index (PMI) data.
In Australia, traders are also reassessing the Reserve Bank of Australia’s (RBA) policy path following weaker labour-market data. While the RBA left interest rates unchanged at its last meeting and signalled that future rate hikes remain more likely than cuts, softer employment figures have prompted markets to push back expectations for a rate hike into the second half of 2026.
Elsewhere, weak economic data from China is adding to the downside pressure on the Aussie, given Australia’s close trade ties with its largest trading partner. Signs of a slowing momentum in the world’s second-largest economy emerged in November, with industrial output rising 4.8% YoY, below expectations and slightly slower than in October, while Retail Sales increased just 1.3%, marking their weakest gain since late 2022.
Australia’s preliminary S&P Global PMI figures are also due on Tuesday.
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
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