Australian Dollar Slides as Trade Surplus Shrinks, Eyes on US NFP Data

Australian Dollar Slides as Trade Surplus Shrinks, Eyes on US NFP

The Australian Dollar (AUD) is under pressure on Thursday, trading lower against the US Dollar (USD) after weak Australian trade data and disappointing Chinese economic figures. The AUD/USD pair has turned bearish but downside potential remains limited due to dovish Fed expectations.

Trade Surplus Misses Expectations

According to the Australian Bureau of Statistics (ABS), the country’s trade surplus dropped to 2,238 million AUD in May, falling short of the 5,091 million forecast and down from a revised 4,859 million in April. This came alongside:

• Exports falling 2.7% MoM
• Imports rising 3.8% MoM

The weak trade performance signals a slowdown in demand and external sector weakness, adding pressure on the Australian economy.

China PMI and Domestic Services Data Paint Mixed Picture

China’s Caixin Services PMI dropped to 50.6 in June, from 51.1 in May, missing the market forecast of 51.0. As China is Australia’s largest trading partner, softening Chinese services demand weighs on AUD sentiment.

On the domestic front, there was a silver lining:

• S&P Global Australia Composite PMI rose to 51.6 in June from 50.5
• Services PMI jumped to 51.8, the fastest growth since May 2024

US Dollar Steady Ahead of Key Jobs Data

Despite recent weakness, the US Dollar remains relatively firm ahead of the US Nonfarm Payrolls (NFP) report due later today. Markets expect an increase of 110,000 jobs in June, and any downside surprise may boost speculation of a Fed rate cut, which could support AUD in the short term.