AUD/USD under pressure as Australia business confidence stays negative

AUD/USD faces downward pressure following the release of Australia's May business confidence survey, which showed a modest improvement but remained firmly in negative territory across all industries. The NAB Business Confidence Index, while ticking higher, continues to signal broad-based pessimism among Australian businesses. Profitability emerged as the weakest sub-component relative to its long-run average, while capacity utilisation dropped below the critical 82% threshold for the first time since early 2025, indicating an economy losing momentum. These figures reinforce the case for the Reserve Bank of Australia to maintain an easing bias, with markets likely to price in a higher probability of further rate cuts in the coming months. Lower interest rate expectations tend to weigh on the Australian dollar by reducing yield differentials against major counterparts. Traders should monitor upcoming RBA communications for confirmation of dovish intent. Near-term, AUD/USD could test lower support levels if additional domestic data corroborates the economic slowdown narrative, while any hawkish surprises from the RBA would provide a counterbalance.