The Australian dollar edged lower on Wednesday, pressured by a stronger US dollar as investors awaited key PMI data for further clues on global economic momentum. The Aussie’s decline comes amid renewed demand for the greenback, which has been supported by steady US Treasury yields and cautious market sentiment.
The US dollar’s resilience has kept risk-sensitive currencies like the Australian dollar under pressure. Despite growing speculation about future Federal Reserve rate cuts, recent US economic data has shown enough strength to limit any sharp declines in the greenback. If the upcoming PMI figures indicate sustained growth in the US economy, it could further delay expectations of Fed easing, reinforcing the dollar’s strength.
Meanwhile, Australia’s economic outlook remains mixed, with softening domestic demand and China’s uneven recovery acting as headwinds. As a key trading partner, any slowdown in Chinese industrial activity directly impacts Australia’s export-driven economy, particularly in commodities like iron ore. With investors closely monitoring China’s next economic moves, the Aussie’s recovery potential remains uncertain.
AUD/USD 1-D Chart as of February 21, 2025 (Source: TradingView)
The Reserve Bank of Australia (RBA) has maintained a cautious stance, keeping rates steady while assessing inflation trends. While some analysts expect the RBA to hold rates higher for longer, any signals of easing inflation or slowing growth could lead to a more dovish outlook, adding further pressure on the Australian dollar.
Technical indicators suggest that AUD/USD is testing key support levels, with further downside possible if risk sentiment weakens. The pair may see increased volatility following the PMI data release, which could provide insight into both US and global economic conditions. A strong US print may push the Aussie lower, while a weaker-than-expected reading could allow some relief.
For now, the Australian dollar remains vulnerable, with the US dollar’s dominance and global growth concerns keeping the currency under pressure. Traders will be closely watching both US and Australian economic releases in the coming days to gauge whether the Aussie can regain momentum or extend its losses further.
