Australian dollar fell following the announcement of the soft Purchasing Managers Index data.
The Australian Dollar (AUD) falls against the US Dollar (USD) with the announcement of disappointing Judo Bank Purchasing Managers Index (PMI) data on Monday. Furthermore, the AUD is under pressure as second-quarter inflation data reduces expectations for another rate hike by the Reserve Bank of Australia (RBA) at its policy meeting on Tuesday.
Markets expect an RBA rate drop in November. Much early than previously predicted for April of next year. These reasons are adding to the downward pressure on the Australian dollar, undermining the AUDUSD pair.
Australia’s Composite PMI decreased to 49.9 in July from 50.2 in June, with Services PMI falling to 50.4 from 51.8.
In July, China’s Caixin Services PMI rose to 52.1, up from 51.2 in June. The index value topped market forecasts of 51.4. Because both countries are close trading partners, economic developments in China can have a big impact on the Australian market.
The AUDUSD pair’s fall may be limited after the US Dollar fell following Friday’s disappointing US labor market data. This has bolstered expectations that the US Federal Reserve (Fed) will lower interest rates in September.
Daily Market Movers: The Australian Dollar falls following the dismal PMI.
The Judo Bank Australia The composite PMI fell to 49.9 in July from 50.2 in June, slipping below the neutral 50 level for the first time since January. The Services PMI fell to 50.4 in July, from 51.8 in June. While this is the sixth straight month of increased services activity, the growth rate was minimal and the slowest seen in this sequence.
In July, US nonfarm payrolls (NFP) increased by 114K from the previous month’s 179K (down from 206K). According to figures released on Friday, this total was lower than expected at 175,000.
In the same reported period, US average hourly earnings fell by 0.2% month on month, falling short of the market consensus of 0.3%. On an annual basis, the figure fell to 3.6% from the prior reading of 3.8%.
The US dollar fell as recent gloomy job statistics raised chances of a Fed rate cut in September.
The US ISM Manufacturing Purchasing Managers Index (PMI) fell to an eight-month low of 46.8 in July, compared to the prior reading of 48.5 and the expected increase to 48.8.
China’s Caixin Manufacturing Purchasing Managers Index (PMI) fell to 49.8 in July, below the expected reading of 51.5 and the previous reading of 51.8.
The Australian Bureau of Statistics (ABS) recorded a trade surplus of $5,589 million in June, exceeding the expected 5,000 million but remaining below the previous figure of $5,773 million.
During a press conference, Federal Reserve Chair Jerome Powell said a rate cut in September is “on the table.” According to Reuters, Powell stressed that the central bank will continuously monitor the labor market and stay vigilant for indications of a probable dramatic drop.
