The Australian Dollar (AUD) continued its upward momentum on Thursday, marking its fifth consecutive day of gains against the US Dollar (USD). The AUD/USD pair climbed above the 0.6600 level, reaching its highest point in eight months, supported by strong economic data and an improving global risk outlook.
Australia’s preliminary Judo Bank Purchasing Managers’ Index (PMI) readings provided a solid boost to the currency. The Composite PMI rose to 53.6 in July from 51.6, hitting its highest level since April 2022 and marking a full ten months of consecutive expansion. The Services PMI surged to 53.8—its fastest pace in 16 months—while the Manufacturing PMI rose to 51.6, driven by a rebound in new orders and the strongest rise in business activity in over three years.
Speaking at the Anika Foundation in Sydney, Reserve Bank of Australia (RBA) Governor Michele Bullock emphasized the importance of keeping inflation low and stable amid lingering global uncertainties. Meanwhile, the RBA’s latest meeting minutes indicated a cautious approach to rate cuts, with most policymakers preferring to wait for clearer signs of slowing inflation.
Weaker USD and Trade Optimism Fuel AUD Rally
The AUD/USD’s strength is further supported by a broad decline in the US Dollar. The US Dollar Index (DXY) slipped to around 97.10 as traders weighed growing political noise and economic uncertainty in the US. Market attention is now focused on the S&P Global US PMI data set for release later Thursday, which may offer fresh direction for the greenback.
Trade optimism is also bolstering investor appetite for risk-sensitive assets like the Aussie. Reports suggest the US and the European Union are nearing a trade agreement that would involve a 15% tariff on EU imports. Separately, President Donald Trump confirmed a new trade deal with Japan, including a 15% tariff on Japanese goods and a commitment from Japan to invest $550 billion in the US.
Fed Uncertainty, Political Tensions Keep Pressure on USD
Uncertainty around the Federal Reserve’s future path continues to weigh on the USD. Fed officials remain divided: Governor Christopher Waller advocates a rate cut at the upcoming July meeting, while Governor Adriana Kugler and San Francisco Fed President Mary Daly suggest rates should remain elevated in the near term. The political environment is also heating up, with Republican Congresswoman Anna Paulina Luna accusing Fed Chair Jerome Powell of perjury. Meanwhile, Treasury Secretary Scott Bessent stated that a nominee to succeed Powell could be announced by early next year, but there’s “no rush” in making the decision.
Adding to the global trade narrative, high-level talks between the US and China are scheduled for next week in Stockholm. These follow recent meetings between Treasury Secretary Bessent and Chinese Vice Premier He Lifeng in Geneva and London.
Australian Outlook Mixed Despite Strong PMI Readings
Despite the upbeat PMI data, there are still signs of underlying softness in Australia’s economy. Westpac’s Leading Index—a measure of future economic activity—dropped to 0.03% in June from 0.11% in May, reflecting slower momentum due to falling commodity prices, reduced working hours, and weaker sentiment.
Looking ahead, traders will closely monitor US PMI figures, initial jobless claims, and new home sales data for fresh clues on US economic performance. These releases, along with developments in global trade talks and central bank policy expectations, are likely to shape the next moves in the AUD/USD pair.
