The Australian Dollar (AUD) retreated against the US Dollar (USD) on Monday following disappointing Judo Bank Purchasing Managers Index (PMI) data. The currency faced additional pressure as recent second-quarter inflation figures dampened expectations for another rate hike by the Reserve Bank of Australia (RBA) at its upcoming policy meeting.
Key Points:
- Judo Bank Australia Composite PMI fell to 49.9 in July, below the crucial 50-mark
- Markets are now pricing in potential RBA rate cut as early as November
- China’s Caixin Services PMI rose to 52.1 in July, beating expectations
The shift in RBA rate expectations is weighing heavily on the Aussie, with markets now eyeing a potential rate cut in November—significantly earlier than previous forecasts for April next year. This outlook is contributing to downward pressure on the AUD/USD pair.
Despite the Australian Dollar’s weakness, the downside may be limited due to the recent softness in the US Dollar. Friday’s underwhelming US labour market data has fueled speculation that the Federal Reserve might consider an interest rate cut in September.
Market Movers:
- US Nonfarm Payrolls increased by 114,000 in July, falling short of the 175,000 forecast
- US Average Hourly Earnings growth slowed to 0.2% month-over-month
- US ISM Manufacturing PMI dropped to an eight-month low of 46.8 in July
China’s economic data continues to influence the Australian market due to the close trade relationship between the two nations. The Caixin Services PMI for China showed improvement, rising to 52.1 in July from June’s 51.2, surpassing market expectations.
As traders digest these mixed signals, all eyes are now on the RBA’s policy decision due Tuesday and upcoming economic indicators that could provide further direction for the AUD/USD pair.