Australian Dollar Trims Gains as US Dollar Recovers Ahead of PMI Data

Australian Dollar Trims Gains as US Dollar Recovers Ahead of PMI Data

May 23, 2025 – The Australian Dollar (AUD) edged slightly higher against the US Dollar (USD) in Thursday’s early trading but has since trimmed its intraday gains, as the Greenback stabilizes ahead of important US economic data releases.

The AUD/USD pair had initially strengthened following a dip in the USD, but momentum cooled after the release of Australia’s preliminary S&P Global Purchasing Managers Index (PMI) data for May. The Manufacturing PMI held steady at 51.7, signaling mild expansion in the sector. However, the Services PMI dropped to 50.5, down from 51.0, pushing the Composite PMI slightly lower to 50.6, which indicates marginal growth across the broader economy.

The Aussie had gained support earlier in the week following the Reserve Bank of Australia’s (RBA) decision to cut its Official Cash Rate (OCR) by 25 basis points on Tuesday. RBA Governor Michele Bullock defended the move, calling it a "prudent and confidence-boosting decision", aimed at addressing persistent inflation while recognizing current economic softness. Bullock added that the Board remains open to further action if warranted, keeping the door open for more flexible monetary policy in the future.

Meanwhile, on the US side, the US Dollar is seeing renewed buying interest as investors brace for key PMI data expected later in the day. Recent statements by Federal Reserve policymakers have highlighted that shifting US trade policy has contributed to weaker consumer and business confidence, adding another layer of uncertainty to the economic outlook.

Market participants now turn their attention to upcoming US Manufacturing and Services PMI figures, which could influence the next moves in the AUD/USD pair, especially as traders assess diverging monetary policy paths between the RBA and the US Federal Reserve.