The Australian dollar (AUD) has shown mixed signals recently, particularly following comments from Reserve Bank of Australia (RBA) Governor Michele Bullock, who acknowledged the positive direction of overall inflation while highlighting persistent challenges with services inflation. These comments have contributed to a wavering sentiment around the AUD.
Market analysts are now turning their attention to China's forthcoming trade data, which could play a critical role in determining the future strength of the AUD. A potential strengthening in Chinese import growth may provide the AUD with much-needed support, especially given its status as a commodity currency that closely follows global demand for Australian exports like iron ore, coal, and natural gas.
Recent developments have also highlighted the impact of the RBA's monetary policy on the AUD. In May 2025, the RBA cut the cash rate by 25 basis points to 3.85%, aiming to mitigate inflation and acknowledge global economic uncertainties. This decision corresponded with a notable drop in the AUD, which hit a five-year low of $0.5933 amid escalating trade tensions, particularly between the U.S. and China.
As of now, the AUD/USD exchange rate stands at approximately 0.6500, just 0.7% below its three-month average of 0.6544. The pair has traded within a stable range of 4.1% recently. Comparatively, the AUD is near its three-month averages against the EUR (0.5602), GBP (0.4873), and has shown a stronger performance against the JPY at 98.79, which is 1.9% above its three-month average.
Economists emphasize that the AUD is likely to remain volatile, given its susceptibility to commodity price fluctuations and global market sentiment. Experts suggest that the upcoming economic indicators and trade data will be critical in shaping investor sentiments and the AUD's trajectory in the near future.
