The Australian Dollar (AUD) traded under pressure against the US Dollar (USD). This decline came on the back of mixed employment data from Australia and a dovish interest rate cut declared by the US Federal Reserve. The AUD/USD pair dropped as soon as Asian markets opened on Thursday. It held above the mid-0.6600s, but traders were on the defensive on hope for Australian labor market and the fallout from US monetary policy.
The US Dollar Index (DXY) is the Greenback’s main measure against a basket of currencies. In reality, it has been sitting around its recent nadir since October 21. The Federal Reserve caught some market participants off guard on Wednesday when it decided to cut borrowing costs by 25 basis points. This decision set off a huge market downturn. Instead of a hawkish pivot on Wednesday, Fed Chair Jerome Powell delivered a surprisingly dovish outlook in the post-meeting press conference. The central bank was more hawkish in terms of their future rate cuts.
Now traders are again in optimistic mood on the prospects for more rate cuts. As proof, one need look no further than their reactions to the Fed’s announcement and the newest economic data. The tone in the markets has been negative. This has created heavy downward pressure on the AUD, particularly in the wake of Australia’s own shockingly bad employment data.
In November, Australia endured a calamity in job creation. The country added just 21,300 jobs in the whole month. This figure hugely underperformed projections, which had expected an increase of 20K jobs. The prior employment number for October was revised down. They fell from the first print of 42.2K to 41.1K, increasing the worries about the strength of the Australian labor market. This deteriorating jobs picture has put further bearish pressure on the AUD/USD currency pair.
The lukewarm labor market and dovish posturing by the Fed have made investors re-evaluate what they’re expecting. They are now looking ahead to possible future rate rises down under. Today is no time to give up on additional rate reductions in the US, particularly with the new economic climate that we find ourselves in. Traders are, consequently, now pricing in two additional cuts in 2026 and positioning themselves on that basis.
The resoundingly positive sentiment across broader markets has contributed to the Greenback by lowering its safe-haven appeal. In addition, investors are aggressively looking for growth opportunities and future stars. Consequently, the demand for currencies such as the AUD can swing wildly on sentiment rather than on economic fundamentals.
As the Asian session rolled on into Thursday, the AUD/USD pair was just getting started on its southbound path. The dichotomy of positive and negative Australian economic statistics has kept traders on edge as to whether AUD will be strong in the future or not. The Fed has already turned pretty dovish and everybody is looking for rate cuts down the road. Consequently, the future for both cryptocurrencies has become unpredictable.