Australia's Trade Balance for June posted a surprise surplus of A$1,929 million month-over-month, reversing a revised deficit of A$2,367 million in May and significantly outperforming market expectations for a deficit of A$1,100 million [2][3]. The turnaround was driven by a sharp 9.6% month-over-month increase in exports and a 0.2% decline in imports [2][3]. Following the release, the Australian Dollar (AUD) pared losses, with AUD/USD trading around 0.7055 to 0.7060 during the Asian session, though it was down 0.03% on the day [2][3]. The AUD was the weakest against the Swiss Franc among major currencies [3].
The positive sentiment for risk assets, including the AUD, was further supported by reports that Iran and Oman are close to finalizing a framework for commercial shipping through the Strait of Hormuz, raising hopes for increased Middle Eastern energy flows and a diplomatic resolution to the US-Iran conflict [2][4][5]. However, Iranian officials emphasized that the agreement would not represent a complete reopening of the strategic waterway, and the proposed route is expected to operate for two to four months [2][5].
US economic data released on Wednesday showed private-sector employment increased by just 44,000 jobs in July, down from 98,000 in June and below the consensus of 70,000 [2][5]. The ISM Services PMI edged up to 54.1 in July from 54.0 in June, but missed the forecast of 54.5 [2][5]. According to strategists at Scotiabank, the US labor market remains tight but is not adding to inflationary pressures, which is seen as a mild negative for the US Dollar [2]. The softer US data, combined with receding Federal Reserve rate hike bets and improved risk sentiment, weighed on the USD and supported riskier currencies such as the AUD, GBP, and EUR [1][2][4][5].
Strategists noted that the USD is steady to slightly softer overall as markets weigh geopolitical developments, commodity moves, and upcoming US data releases [2]. Technical analysis suggests AUD/USD maintains a bullish tone above key moving averages, with potential to target four-year highs if momentum persists [2].
Looking ahead, investors are awaiting the US Initial Jobless Claims report and the crucial US Nonfarm Payrolls (NFP) data on Friday, which are expected to provide further direction for currency markets [1][2][4][5].
CONCLUSION
Australia's unexpected trade surplus and improved risk sentiment from Middle East diplomatic progress have buoyed the Australian Dollar, while weaker US jobs data and fading Fed rate hike expectations have pressured the US Dollar. Market participants remain cautious ahead of key US labor data, which could determine the next moves for major currency pairs.