The Australian dollar edged lower on Wednesday as the US dollar held firm ahead of key economic data releases. Traders remained cautious, with the market awaiting the latest PMI data from the US, which could provide further clues on the Federal Reserve’s policy path.
Despite the decline, Aussie losses were limited as investors assessed broader market conditions. The Australian currency has struggled for clear direction in recent sessions, caught between domestic economic concerns and external pressures from a stronger US dollar.
The US dollar remained steady, supported by expectations that the Federal Reserve will keep interest rates higher for longer. Recent Fed commentary has emphasized a data-dependent approach, with traders looking to PMI figures for signals on economic strength and inflation trends.
AUD/USD 1-D Chart as of February 21, 2025 (Source: TradingView)
Meanwhile, Australia’s economic outlook remains mixed, with inflation showing signs of easing but growth momentum slowing. The Reserve Bank of Australia (RBA) has maintained a cautious stance, leaving traders uncertain about the timing of any future policy adjustments.
Broader risk sentiment also played a role, with global markets in a wait-and-see mode ahead of upcoming economic indicators. Concerns over China’s recovery and geopolitical uncertainties have added to the cautious tone, impacting demand for risk-sensitive currencies like the Aussie.
Looking ahead, PMI data and Fed policy expectations will likely dictate short-term moves in the currency market. If US data comes in stronger than expected, the dollar could gain further ground, putting additional pressure on the Australian dollar.
