The Australian dollar (AUD) fell against the U.S. dollar (USD) on Friday, extending its decline for the third consecutive session, as market sentiment favored the greenback amid fresh economic data and central bank cues. The AUD/USD pair traded around 0.6610 during the Asian session, testing technical support near 0.6600, following a combination of weaker domestic employment figures and renewed strength in the U.S. dollar.
Australian Labor Market Pressure
Australia’s August jobs report disappointed investors, showing a seasonally adjusted employment change of -5.4K, a sharp decline from July’s upwardly revised 26.5K (previously 24.5K), and well below the consensus forecast of 22K. Despite the employment decline, the unemployment rate remained steady at 4.2%, in line with expectations. The data signaled that the labor market may be losing momentum, putting additional pressure on the AUD as investors reassessed the likelihood of future Reserve Bank of Australia (RBA) rate cuts.
Although the probability of a September RBA rate cut has receded to roughly 20% from 70% in November, above-target inflation continues to constrain policymakers, keeping interest rates near current levels. RBA Assistant Governor Sarah Hunt emphasized that inflation is approaching the target range and highlighted the importance of monitoring domestic consumption and employment trends, given the delayed effects of monetary policy.
U.S. Dollar Gains Support from Strong Labor Data and Fed Policy
The U.S. dollar benefited from stronger-than-expected labor market signals. Data from the U.S. Department of Labor showed that initial jobless claims fell to 231,000 in the week ending September 13, below the consensus forecast of 240,000 and the prior week’s revised 264,000. Continuing claims also declined by 7,000 to 1.92 million.
The Federal Reserve cut its benchmark interest rate by 25 basis points (bps), the first cut of the year, and projected an additional 50 bps of cuts later in 2025. Fed Chair Jerome Powell cited emerging signs of labor market slack as the rationale, reflecting a cautious approach to balance economic growth and inflationary pressures. The combination of falling jobless claims and the Fed’s measured policy stance supported the U.S. dollar, contributing to the AUD/USD decline.
China’s Economic Data Adds to Market Uncertainty
Further pressure on the AUD stemmed from disappointing Chinese economic indicators. Retail sales growth in August slowed to 3.4% year-on-year, below expectations of 3.8% and down from 3.7% in July. Industrial production rose 5.2%, also below forecasts of 5.8% and July’s 5.7%. The National Bureau of Statistics highlighted operational challenges for businesses amid external economic pressures, reinforcing global growth concerns and weighing on risk-sensitive currencies such as the Australian dollar.
Market Outlook and Key Considerations
Investors remain focused on developments in U.S. monetary policy, Australian labor market trends, and global economic growth indicators. Further clarity from the Federal Reserve on rate cut guidance, combined with domestic employment data in Australia, will likely dictate near-term AUD/USD movements. Additionally, ongoing developments in China’s economy and geopolitical factors, such as trade relations, will continue to influence market sentiment.
In conclusion, the Australian dollar remains under pressure as weaker domestic data coincides with a supported U.S. dollar and cautious global economic outlook. While technical support around 0.6600 may limit immediate declines, short-term momentum suggests volatility is likely to persist, and traders should monitor central bank communications, labor market trends, and global growth indicators for potential directional cues.
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