Australia faces challenges as economic data causes AUD/USD to decline

The AUD/USD currency pair remains in a disappointing situation as various factors from both sides have exerted pressure on the Australian dollar. On Thursday, the pair was trading around 0.6690, down 0.40% during the same period, after recently reaching a high in over a year the previous day.

Decline in Trade Surplus as a Key Factor

The Australian Bureau of Statistics (ABS) released data that disappointed investors, showing that the trade surplus in November shrank to AUD 2.936 billion from over AUD 4 billion in October. This sharp decline was primarily due to a 2.9% month-on-month decrease in exports, while imports remained slightly higher.

This deterioration in the foreign trade situation has created risks to the country’s economic growth in the latter part of the year, with investors beginning to doubt Australia’s ability to maintain strong export levels.

Slowing Inflation Adds Policy Uncertainty

On the inflation front, the Consumer Price Index (CPI) recorded a 3.4% increase year-over-year (YoY) in November, below market expectations and the rise seen in October. Although this figure remains above the Reserve Bank of Australia (RBA) target range, the slowdown in price signals is significant.

Mr. Andrew Housser, Deputy Governor of the RBA, stated that the figures were in line with expectations and reiterated that interest rate cuts are unlikely in the near future. However, the central bank continues to follow a data-dependent policy approach.

US Dollar Strengths Weigh on AUD

Meanwhile, in the United States, the US dollar (USD) has been supported by economic data demonstrating resilience. Recent employment and services activity data confirm the underlying strength of the US economy, limiting the likelihood of the Federal Reserve (Fed) easing monetary policy.

Investors are closely watching the US non-farm payrolls (NFP) report scheduled for Friday. This data is viewed as a key factor in shaping short-term interest rate expectations and has the potential to create market volatility.

Policy Divergence Between the Two Countries Affects the Currency Pair

The divergence of factors between Australia and the US is a primary driver of pressure on AUD/USD at present. The pair remains vulnerable to significant economic surprises that could alter the monetary policy outlooks of both central banks. The possibility of further contraction in this currency pair persists if Australian data continues to disappoint.