The AUD/USD pair is trading with modest gains near 0.6670 early on Friday during the Asian trading hours. The US Dollar (USD) has been under pressure due to growing speculation about a potential rate cut by the US Federal Reserve (Fed) and recent softer US economic data, creating a favorable environment for the Australian Dollar (AUD).
Attention is now focused on the upcoming US Nonfarm Payrolls (NFP) data for May, which will be released later on Friday. This data could provide further insight into the Fed’s potential actions.
This week, weaker US economic indicators have intensified expectations of a Fed rate cut in September. According to the CME FedWatch tool, traders now see a nearly 68% chance of a rate cut at the September meeting, up from 50% at the start of the week.
Data from the US Labor Department on Thursday showed an increase in jobless claims for the week ending May 31, rising by 8,000 to 229,000 from the previous week’s 221,000, surpassing the forecast of 220,000. Earlier, the US Manufacturing PMI for May fell to 48.7 from April’s 49.2, reflecting weaker-than-expected performance.
Meanwhile, the Australian Dollar received a boost from a hawkish statement by Reserve Bank of Australia (RBA) Governor Michele Bullock on Wednesday. Governor Bullock emphasized the central bank‘s data-driven approach, suggesting that while the RBA maintains a neutral stance for now, persistent inflation could lead to further interest rate hikes.
In summary, the AUD/USD pair is benefitting from both a weakening US Dollar, influenced by softer economic data and rate cut expectations, and a supportive stance from the RBA. Traders will be closely monitoring the NFP release for further direction.
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