Australian Dollar Declines as Weak Labor Data Supports RBA Rate Cut Bets

Australian Dollar Declines as Weak Labor Data Supports RBA Rate Cut Bets

The Australian Dollar (AUD) weakened against the US Dollar (USD) during Thursday’s session, as worse-than-expected labor data from Australia reinforced market expectations that the Reserve Bank of Australia (RBA) may soon cut interest rates.

Australian Labor Market Disappoints

According to the Australian Bureau of Statistics, Australia added just 2,000 jobs in June, missing the forecast of 20,000. In addition, the Unemployment Rate rose to 4.3% from 4.1% in May — the highest level since late 2021 — exceeding the market expectation of 4.1%.

This labor report has raised concerns about a slowdown in the Australian economy and has increased pressure on the RBA to act. Analysts now believe that rate cuts in August or September are more likely as the central bank responds to softening job market conditions.

US Dollar Gains on Strong Sentiment and Policy Expectations

The US Dollar, meanwhile, strengthened as investors anticipated the Federal Reserve (Fed) would hold interest rates steady in July amid persistent inflation pressures. President Donald Trump's latest tariff stance and comments on the Federal Reserve’s leadership have also drawn market attention.

Trump stated he would prefer Fed Chair Jerome Powell to resign but warned that removing him would destabilize markets. He also hinted at possible trade agreements with Europe and India, while remaining cautious on future actions with Canada.

Market Outlook: AUD/USD Vulnerable

With deteriorating labor figures and stronger USD momentum, the AUD/USD pair remains under pressure. Any escalation in US trade policy or additional weak Australian economic indicators could further accelerate AUD downside in the near term.

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