AUD/USD holds firm on Wednesday near 0.6590, gaining roughly 0.50% as broad US Dollar (USD) softness continues. The Greenback remains on the back foot amid rising speculation over a potential leadership shift at the Federal Reserve (Fed) and a steady flow of data signaling cooling momentum in the US economy.
Reports suggesting that Kevin Hassett, the White House economic adviser, could replace Jerome Powell when his term ends in May have added to USD downside pressure. Hassett has previously voiced support for lower interest rates, prompting markets to price in a more dovish policy path should he take over—further weighing on the USD.
Soft US data reinforces dovish expectations
US economic releases this week have strengthened the bearish bias on the Dollar. The latest ISM Services PMI shows the sector still expanding but losing steam, with new orders slowing sharply and employment contracting for a sixth straight month. Final S&P Global Services PMI data also point to softer activity.
The ADP Employment Change report added to the weak tone, showing a surprise decline of 32,000 jobs in November versus expectations for job creation. These data points support expectations that the Fed may begin easing as early as next week’s policy meeting.
AUD supported despite softer GDP
In Australia, the Australian Dollar (AUD) remains relatively resilient even after third-quarter GDP missed expectations. Growth came in at 0.4% QoQ compared with the 0.7% forecast, though underlying details of the report were broadly stable.
RBA’s hawkish tone underpins AUD
The AUD drew additional support from the Reserve Bank of Australia (RBA), where Governor Michele Bullock signaled that further tightening may be required if inflation proves persistent. She highlighted that the labor market remains “a little tight” and suggested the output gap is likely “closed,” reinforcing the RBA’s hawkish bias.
What’s next
Markets now turn their focus to Australia’s Trade Balance release on Thursday, while US market participants await Friday’s PCE report—the final key data point before the Fed delivers its monetary policy decision next week.
