The Australian Dollar (AUD) remained stable on Thursday following two consecutive days of losses, as the US Dollar (USD) came under pressure after the Federal Reserve’s (Fed) Beige Book indicated weakening economic conditions in the United States.
The Fed’s April Beige Book revealed that concerns over tariffs have exacerbated the economic outlook in several US regions. Consumer spending showed mixed results, and there were signs of softening in the labor market, with many districts reporting flat or slightly declining employment levels. These developments contributed to a weaker USD, which could benefit the Australian Dollar in the short term.
Market participants are also anticipating a rate cut from the Reserve Bank of Australia (RBA) at its May 20 meeting, with Westpac predicting a 25-basis-point reduction. The RBA’s policy decisions have been highly data-driven, making the direction of future monetary policy uncertain beyond the upcoming meeting.
US President Donald Trump’s remarks on tariffs further complicated the outlook. Trump stated that it is up to China to decide how quickly tariffs can be reduced, adding that the US would determine the tariff rates for China over the next two to three weeks. While he expressed a willingness to negotiate, the ongoing trade tension continues to weigh on sentiment. National Economic Council Director Kevin Hassett suggested that a full trade deal with China could take 2-3 years.
Meanwhile, Australian economic data showed continued expansion. Preliminary figures from Judo Bank indicated that private sector activity grew for the seventh consecutive month in April, supported by growth in both manufacturing and services.
In the currency markets, the US Dollar Index (DXY), which measures the USD against six major currencies, edged lower after two days of gains, trading near 99.60. The Greenback struggled following the release of mixed S&P Global Purchasing Managers Index (PMI) data on Wednesday. The flash S&P Global Composite PMI for April dropped to 51.2 from 53.5, signaling a slowdown in overall business activity. Although the Manufacturing PMI increased slightly to 50.7, the Services PMI fell sharply to 51.4 from 54.4, pointing to softening demand in the services sector.
Commenting on the data, S&P Global’s Chris Williamson noted that growth momentum is losing steam, while inflationary pressures continue to complicate the Federal Reserve’s balancing act. US Treasury Secretary Scott Bessent also acknowledged that the current tariff rates on Chinese and US goods are unsustainable and need to be reduced for meaningful negotiations to begin.
Despite these challenges, market sentiment was buoyed by US President Trump’s reassurances that he has no intention of removing Federal Reserve Chair Jerome Powell, alleviating concerns about the independence of the central bank and its policy direction.
In Australia, the Judo Bank Manufacturing PMI edged down to a two-month low of 51.7 in April, while the Services PMI dipped slightly to 51.4. Despite these slight declines, the Australian economy remains in expansion territory, underpinned by modest growth in both sectors.
The AUD/USD pair was testing immediate support near the nine-day Exponential Moving Average (EMA) at 0.6346, with stronger support at the 50-day EMA around 0.6296. On the upside, resistance is seen at the recent four-month high of 0.6439, with a break above this level potentially paving the way for a rally toward a five-month high of 0.6515.
As the AUD/USD pair trades near 0.6360, technical indicators suggest a bullish tone, with the 14-day Relative Strength Index (RSI) holding steady above 50, signaling continued upward momentum. However, any sustained drop below key support levels could lead to deeper losses.
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