AUD/USD trims gains as traders eye Australian jobs data, US PPI

The Australian Dollar (AUD) is paring back part of its intraday advance against the US Dollar (USD) on Wednesday, with the AUD/USD pair retreating from session highs near 0.6562 to trade around 0.6540 during the American session. Despite trimming gains, the pair remains up around 0.16% on the day, buoyed by broad-based Greenback weakness and steady domestic wage growth, which are helping to underpin the Aussie ahead of the high-stakes Australian labour market data due Thursday.

Australia’s Q2 Wage Price Index released earlier on Wednesday showed annual wage growth holding steady at 3.4%, beating the forecast of 3.3% and matching the previous quarter’s print. On a quarterly basis, wages rose 0.8%, in line with expectations but slightly below the prior 0.9% gain. The data underscores resilient wage pressures, reinforcing the view that underlying inflation may remain sticky. That said, investor focus now turns to July's employment data, due Thursday at 01:30 GMT, for fresh clues on the health of Australia’s labour market and its implications for the Reserve Bank of Australia’s (RBA) next move.

The Reserve Bank of Australia on Tuesday delivered a 25 basis point rate cut, lowering the Official Cash Rate to 3.60%, its third reduction in 2025. The decision was aimed at supporting economic growth amid signs of softening labour demand, weak productivity, and waning domestic consumption. RBA Governor Michele Bullock noted that inflation has moderated faster than expected, falling into the 2–3% target band, and flagged room for further easing if upcoming data confirms a broader slowdown in economic activity.

Against this backdrop, Thursday’s employment data will be closely scrutinized. Consensus estimates point to a 25,000 job gain, a notable recovery from June’s weak 2,000 print. The Unemployment Rate is expected to ease to 4.2% from 4.3%, while the Participation Rate is forecast to remain stable at 67.1%. A weaker-than-expected outcome could strengthen expectations for additional RBA rate cuts before year-end, while a robust print may help limit downside in the Aussie.

Meanwhile, the US Dollar remains on the defensive amid rising expectations of a Federal Reserve (Fed) rate cut in September, following recent softer inflation readings and signs of a cooling labor market. According to the CME FedWatch Tool, markets are now pricing in a 97% probability of a 25 basis point cut at the Fed’s September 17-18 policy meeting.

Traders will now turn their attention to Thursday’s US data, including Weekly Initial Jobless Claims and July Producer Price Index (PPI) figures, which could provide further clarity on the Fed’s policy trajectory and influence near-term USD direction.