The whole global economic landscape is changing profoundly. In the U.S., inflation continues to stay persistently high above the Fed’s 2% target as the Federal Reserve walks a tightrope over an increasingly fragile job market. Recent reports indicate that the Fed now perceives the job market’s decline as a more substantial threat to the economy than ongoing inflation. China’s economy is facing some major headwinds. At the same time, unemployment is increasing and industrial production and retail sales are expanding very slowly.
The dollar has been under extreme international economic pressures, and the Australian dollar (AUD) is responding. It is now trading at 0.6657 USD, which is a 0.12% increase for the day, as it tests significant resistance levels. The AUD has ripped today after a stellar showing last week. It racked up increases of 1.4%, its strongest week since April.
Inflation and Job Market Concerns in the U.S.
With inflation in the United States still persistently above the Fed’s 2% target, there has been considerable debate over future monetary policy moves. The Fed has signaled its intent to make at least one rate cut before the end of the year. Or they could decide to wait until December as they continue to assess the impact of a cooling job market.
Based on recent labor statistics, there are clear indications of stress in the U.S. labor market. As inflation remains high, this dramatic and sudden pivot has forced lawmakers to take a step back, focusing more on stabilizing the job market than controlling inflation. It’s clear that the Fed is treading lightly. Speculation is swirling about the unintended consequences of these decisions—both positive and negative—to the domestic and international economy.
Challenges Facing China’s Economy
At the same time, across the Pacific, China’s economic picture grows more and more dire. Additionally, the unemployment rate has increased to 5.3%, from 5.2%, reaching its highest point since February. That increase points to increasing concerns about the safety of their jobs. The slowing global economy and the continuing US-China trade war are both exacerbating these concerns.
China’s industrial production growth has come to a virtual standstill. Its annual growth in September was only 5.2%, down from 5.8% in August and missing the market’s estimate of 5.7%. Retail sales are anemic. The first of these was disappointing, with Chinese exports rising by just 3.4% year-on-year, down from August’s already slack 3.7% and well below consensus expectations for 3.8% growth. That would be the weakest year-on-year pace of retail sales growth since November 2024.
The Chinese government is doing everything it can to push exporters out into new markets. This effort comes with a heightened urgency to lessen the harmful effects of the U.S.-China trade war with increasing economic pressures.
The Australian Dollar’s Performance
Considering all these big international changes, the Australian dollar has been surprisingly strong in the face of uncertainty. Analysts are now probing resistance at 0.6650 vs. the USD. Further up, they note a major barrier of resistance at 0.6668 if this support level is broken. If the AUD continues its march higher, 0.6630 and then 0.6612 might serve as stronger support levels.
The Australian dollar’s recent appreciation depends primarily on three factors. Both shifts in commodity prices and changes in investor sentiment toward the global economic outlook have been hugely important. Traders are directly tracking the news and reaction in this very dynamic market. Changes in U.S. monetary policy as well as new Chinese economic data could significantly influence AUD/USD trading trends.