The Australian Dollar (AUD) fell sharply against the U.S. Dollar on Friday, with the AUD/USD pair declining over 3.5% to hit a session low of 0.6049, its weakest level since mid-2020. A surge in dovish expectations surrounding the Reserve Bank of Australia (RBA) combined with robust U.S. employment data sent the pair spiraling during early North American trading hours.
Analysts now expect the RBA to initiate a series of rate cuts starting as early as May. ANZ Bank forecasts three consecutive cuts at the central bank’s May, July, and August meetings. Notably, the bank sees the potential for an aggressive 50 basis-point reduction in May should global growth outlooks continue to deteriorate.
Australia’s deep trade ties with China are also weighing on the Aussie. The Chinese economy faces fresh uncertainty after Beijing threatened a 34% tariff on U.S. imports in retaliation to new U.S. trade measures announced by former President Donald Trump.
RBA Dovish Outlook Deepens
Markets are now firmly pricing in a dovish shift from the RBA. Several catalysts have accelerated that sentiment:
- ANZ Projects 3 Rate Cuts: One cut each in May, July, and August
- Possible 50 bps Cut in May: If global risks worsen significantly
- Australia-China Trade Exposure: AUD pressured by China’s tariff threats
- Global Uncertainty: Weakening demand outlook in Asia-Pacific
The RBA has not moved rates since 2024, but forward guidance is increasingly shifting toward accommodation. The AUD’s sharp decline reflects fears that Australia may be among the first developed economies to pivot toward monetary easing in 2025.
U.S. Jobs Data Strengthens USD
Meanwhile, the U.S. Dollar (USD) gained support from stronger-than-expected jobs data. The March Nonfarm Payrolls (NFP) report showed 228,000 jobs added, well above the 135,000 forecast. February’s figure was also revised down to 117,000 from 151,000.
Additional highlights from the labor report:
- Unemployment Rate: Rose slightly to 4.2% from 4.1%
- Average Hourly Earnings: Increased 3.8% year-over-year, slightly below the expected 3.9%
While the USD initially gave up gains during the European session, upbeat NFP data helped it regain momentum. The data also complicates the Federal Reserve’s policy path, especially as inflation shows signs of softening while labor markets remain tight.