The Australian Dollar stayed lower against the US Dollar in Asian trading on Friday. AUD/USD was near 0.7040 after giving back earlier gains. The move followed S&P Global’s preliminary February PMI data. The figures showed slower overall growth, while price pressures stayed firm.

Australian Growth Signals Cooling

Australia’s Composite PMI fell to 52.0 in February from 55.7 in January, marking a seventeenth straight month of expansion. The Services PMI slipped to 52.2 from 56.3, and the Manufacturing PMI edged down to 51.5 from 52.3. The US Dollar also found support after US initial jobless claims fell to 206K for the week ending 14 February. That was down from a revised 229K and below the 225K forecast. Markets are also focused on preliminary US Q4 GDP and PCE data due Friday. Minutes from the Federal Open Market Committee’s January meeting showed officials may consider further rate hikes if inflation stays persistent. Most supported keeping rates steady, only a few backed a cut, and the Fed signaled it could consider easing if inflation cools as expected. The Reserve Bank of Australia targets 2–3% inflation through interest rate settings and can also use quantitative easing or tightening. Iron ore is Australia’s largest export, worth $118 billion a year in 2021, and China is the main destination.

Market Implications For Aud Usd

The Australian Dollar is weakening as the economy shows clearer signs of cooling. The Composite PMI drop to 52.0 from 55.7 suggests growth is slowing, even as inflation pressures remain. A softer growth outlook lowers the chance the Reserve Bank of Australia (RBA) will raise rates, which puts pressure on the AUD. The RBA faces a difficult balance because inflation is still above target. Inflation ended 2025 at 4.1% year over year. While the cash rate has been held at 4.35%, weaker growth makes further hikes harder to justify and limits support for the AUD. Derivative traders may see this as a ceiling on near-term upside for the Aussie. China is another major drag on the currency. As Australia’s largest trading partner, China’s weaker manufacturing activity matters directly. Its official PMI has struggled to stay above 50, the level that signals expansion. That weakness can reduce demand for Australian exports. This is also showing up in iron ore prices, Australia’s top export. After trading above $140 per tonne late last year, prices have dropped to around $120—down more than 14%—as markets worry about Chinese demand. Falling commodity prices are a direct headwind for the AUD. At the same time, the US Dollar is gaining strength, which makes the AUD/USD decline more pronounced. Strong US labor data, including the drop in jobless claims to 206K, along with sticky inflation, is increasing expectations the Federal Reserve will keep rates higher for longer. This widening gap between central bank outlooks supports the US Dollar. With these factors combining, traders may look for further weakness in AUD/USD in the weeks ahead. Possible strategies include buying put options to profit from a break below key support levels, or selling AUD/USD futures. These approaches fit the current trend: slowing growth in Australia and a relatively stronger US outlook. Create your live VT Markets account and start trading now.

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