AUD/USD rebounds as US Dollar slips on soft jobs, ISM data

AUD/USD edges higher near 0.6500, recovering Tuesday’s losses as the US Dollar softens.
Weak US data pressures the Greenback, with ADP jobs and ISM Services PMI both missing forecasts.
Australian GDP slows to 0.2% QoQ in Q1, while PMI data signals sluggish business activity.

Vishal Chaturvedi FXStreet

The Australian Dollar (AUD) appreciates against the US Dollar (USD) on Wednesday, shrugging off softer-than-expected domestic GDP data as the Greenback retreats following disappointing US employment and ISM Services PMI figures.

The AUD/USD pair dipped earlier on Wednesday following the release of softer Australian GDP data, but buyers stepped in near the 0.6450 support — the lower boundary of its recent trading range — triggering a rebound. At the time of writing, the pair is edging higher toward 0.6500, hovering near Tuesday’s high and recovering all of the prior day's losses. The upside, however, remains capped by the 0.6500 psychological mark, which has acted as a firm resistance in recent sessions.

The US Dollar came under renewed pressure as fresh data painted a weaker picture of the world’s largest economy. The ADP Employment Change report showed that private businesses added just 37,000 jobs in May, the lowest print since March 2023 and far below the expected 115,000 increase. April’s figure was also revised lower to 60,000 from 62,000, signaling a clear loss of hiring momentum. Meanwhile, the ISM Services PMI fell into contraction territory, slipping to 49.9 from 51.6 in April, against a forecast of 52. The report marked the first contraction in the US services sector this year. As a result, the US Dollar Index (DXY), which tracks the Greenback against a basket of major peers, dropped from Tuesday’s high near 99.00 to around 98.85 at the time of writing.

While weak US data weighed on the Greenback, the Australian Dollar found limited support from local fundamentals, which also pointed to signs of slowing momentum. The economy expanded by just 0.2% QoQ, down from 0.6% in the previous quarter and missing expectations of 0.4%. While this marked the 14th consecutive quarter of expansion, it was the weakest pace in three quarters. Meanwhile, the S&P Global Australia Composite PMI fell to 50.5 in May from 50.6 in April, indicating only marginal growth. The Services PMI edged up to 50.6 in May from 50.5 in April, indicating a slight improvement in services sector activity.

Looking ahead, traders will turn their focus to Australia’s trade balance data due Thursday, followed by the closely watched US Nonfarm Payrolls (NFP) report on Friday. Both releases could inject fresh volatility into the AUD/USD pair, especially if the US labor market data reinforces expectations of a policy shift from the Federal Reserve.

Economic Indicator

Trade Balance (MoM)

The trade balance released by the Australian Bureau of Statistics is the difference in the value of its imports and exports of Australian goods. Export data can give an important reflection of Australian growth, while imports provide an indication of domestic demand. Trade Balance gives an early indication of the net export performance. If a steady demand in exchange for Australian exports is seen, that would turn into a positive growth in the trade balance, and that should be positive for the AUD.

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