Australian Dollar remains stronger as US Dollar depreciates ahead of Retail Sales, PPI

• The Australian Dollar experienced upward momentum as improved global trade prospects bolstered risk appetite among investors.
• Australia’s latest Employment Change figures revealed a substantial increase of 89,000 new jobs in April, significantly outstripping the projected figure of 20,000.
• The de-escalation of global trade tensions has tempered market expectations regarding potential interest rate reductions by the Federal Reserve this year.

The Australian Dollar (AUD) is trading higher against the US Dollar (USD) on Thursday, recovering from losses exceeding 0.50% recorded in the previous trading session. The AUD/USD currency pair has benefited from a resurgence in risk sentiment, driven by easing concerns over global trade frictions, which has increased demand for risk-sensitive currencies such as the Aussie Dollar.

Data released on Thursday by the Australian Bureau of Statistics (ABS) indicated a robust increase in Employment Change, reaching 89,000 in April. This represents a significant jump from the 36,400 jobs added in March and far exceeds economists’ forecasts of 20,000. Concurrently, the Unemployment Rate remained stable at 4.1% in April, holding steady from the previous month’s reading, indicating a stable labor market.

In a development that could potentially reshape international relations, Ali Shamkhani, a senior advisor to Iran’s supreme leader, announced on Wednesday that Iran is open to signing a revised nuclear agreement with the United States under President Donald Trump. According to reports from NBC, the proposed agreement would involve Iran committing to a permanent cessation of nuclear weapons development in exchange for the immediate removal of all US-imposed economic sanctions.

Over the past weekend, the United States and China reportedly achieved a preliminary consensus during trade discussions held in Switzerland, focusing on a substantial reduction in existing tariffs. The proposed terms of the agreement would see the US decreasing tariffs on Chinese goods from 145% to 30%, while China would reciprocate by lowering its tariffs on US imports from 125% to 10%. This development is widely interpreted as a constructive step towards de-escalating the ongoing trade disputes between the two economic powerhouses. Market analysts suggest that successful implementation of these tariff reductions could significantly boost global trade volumes and improve investor confidence.

Australian Dollar gains momentum as US Dollar weakens amid improved risk appetite

• The US Dollar Index (DXY), a measure of the US Dollar’s value against a basket of six major currencies, is currently trading lower, hovering around the 100.90 level at the time of this report. Market participants are closely monitoring the upcoming releases of US Retail Sales data and the Producer Price Index (PPI) for April, scheduled for later on Thursday, which could provide further insights into the health of the US economy.
• The easing of global trade tensions has fostered increased optimism among investors, leading to a reduction in perceived recession risks. This shift in sentiment may offer some degree of support to the US Dollar. Furthermore, market expectations for interest rate cuts by the Federal Reserve (Fed) this year have become less pronounced. Data from LSEG indicates a 74% probability of a 25-basis-point rate cut in September, a decrease from earlier projections that anticipated a potential rate cut as early as July.
• The US Consumer Price Index (CPI) for April showed an increase of 2.3% year-over-year, slightly below the 2.4% increase recorded in March and in line with market expectations. The Core CPI, which excludes volatile food and energy prices, also rose by 2.8% annually, matching both the previous month’s figure and consensus forecasts. On a month-over-month basis, both the headline CPI and core CPI registered increases of 0.2% in April, suggesting a moderate pace of inflation.
• US President Donald Trump stated in an interview with Fox News that his administration is actively pursuing greater access to the Chinese market, describing the current relationship as “excellent” and expressing a willingness to engage in direct negotiations with President Xi Jinping to reach a potential trade agreement.
• China’s Consumer Price Index (CPI) experienced a decline for the third consecutive month in April, falling by 0.1% year-on-year, matching both the market forecast and the decrease recorded in March, according to data published by the National Bureau of Statistics on Saturday. Simultaneously, the Producer Price Index (PPI) contracted by 2.7% year-on-year in April, exceeding the 2.5% drop observed in March and falling short of the market expectation of a 2.6% decline, indicating continued deflationary pressures in the manufacturing sector.
• Australia’s seasonally adjusted Wage Price Index (WPI) demonstrated a rise of 3.4% year-over-year in the first quarter of 2025, an increase from the 3.2% gain recorded in the first quarter of 2024 and surpassing market expectations of a 3.2% increase. This represents a recovery from the prior quarter, which had recorded the slowest rate of wage growth since the third quarter of 2022. On a quarterly basis, the index increased by 0.9% in Q1, exceeding the projected rise of 0.8%.
• Australian Prime Minister Anthony Albanese was inaugurated for a second term in office on Tuesday following a decisive victory in the recent elections. Key cabinet portfolios, including Treasurer, Foreign Affairs, Defense, and Trade, will remain unchanged. Prime Minister Albanese is scheduled to attend the inauguration Mass of Pope Leo XIV in Rome on Sunday, where he is also expected to hold meetings with prominent leaders such as European Commission President Ursula von der Leyen to discuss matters related to trade relations and potential areas of cooperation.
• The easing of global trade tensions has led investors to moderate their expectations regarding aggressive interest rate cuts in Australia. Financial markets are now projecting the Reserve Bank of Australia (RBA) to reduce the official cash rate to approximately 3.1% by the end of the year, a revision from earlier forecasts that anticipated a rate of 2.85%. Despite these adjustments, the RBA is still widely anticipated to implement a 25-basis-point rate cut at its forthcoming policy meeting, aimed at providing further stimulus to the Australian economy.

Australian Dollar climbs towards 0.6450, rebounding from levels near the nine-day EMA

The AUD/USD pair is currently trading near the 0.6440 level on Thursday. Technical analysis of the daily chart suggests a prevailing bullish sentiment, with the pair maintaining its position above the nine-day Exponential Moving Average (EMA). Furthermore, the 14-day Relative Strength Index (RSI) remains above the 50 threshold, providing additional support for the ongoing positive momentum.

Looking ahead, the currency pair has the potential to retest the six-month high of 0.6515, which was last observed on December 2, 2024. A sustained move above this resistance level could pave the way for a further rally towards the seven-month high of 0.6687, recorded in November 2024.

Initial support is identified at the nine-day EMA around 0.6429, followed by the 50-day EMA near 0.6355. A decisive break below these support levels could potentially weaken the short- to medium-term outlook for the pair, potentially opening the door for a more significant decline towards 0.5914, a level last seen in March 2020.

AUD/USD: Daily Chart