Australian Trade Woes and Inflation Easing Drag AUD to USD Lower

The Australian Dollar weakens against the US counterpart, with AUD/USD slipping to around 0.6690 on Thursday as sellers regain control following Wednesday’s peak—a 12-month high that proved short-lived. The pullback marks a 0.40% daily decline, signaling a shift in market sentiment after a brief bullish episode.

What’s undermining the pair? Australia’s trade picture just turned less rosy. Official data from the Australian Bureau of Statistics revealed that export momentum fizzled in November, dropping 2.9% month-on-month after climbing in October. Meanwhile, incoming shipments picked up slightly, creating a squeeze on the trade balance. The result: Australia’s trade surplus compressed to AUD 2.936 billion from over AUD 4 billion the previous month. This narrowing surplus poses a headwind for economic growth projections, particularly as the year winds down.

Adding fuel to the fire, inflation readings from earlier this week dealt another blow to confidence. The Consumer Price Index expanded 3.4% annually in November—a disappointment relative to forecasts and a deceleration from October’s pace. While still sitting above the Reserve Bank of Australia’s comfort zone, this moderation in price pressures introduces fresh uncertainty about the central bank’s next policy moves.

RBA Messaging and the Fed’s Strength

Reserve Bank officials seemed relatively unfazed. Deputy Governor Andrew Hauser indicated the latest figures aligned with their script, emphasizing that rate cuts remain off the table for now. Still, the bank maintains its data-dependent stance, leaving room for tactical shifts if economic conditions deteriorate further.

Across the Pacific, the US economy continues to flash green lights. Employment figures and services data paint a picture of resilience that keeps the Federal Reserve in a holding pattern. With the Fed showing no rush to ease monetary conditions, the interest rate differential between the two nations continues to favor USD assets.

Looking Ahead

AUD/USD traders have their eyes locked on Friday’s US Nonfarm Payrolls report, a barometer that could reshape rate expectations and reignite volatility in this currency pair. The contrasting economic narratives between Australia’s softening momentum and America’s durability will keep downside pressure lingering on AUD to USD, with macroeconomic surprises potentially serving as the next inflection point.