Australian dollar continues to fall following the announcement of PMI data.
The Australian Dollar (AUD) is down for the eighth day in a row following the release of mixed data from Australia’s Judo Bank Purchasing Managers Index (PMI) on Wednesday. Furthermore, slowing economic activity in China has increased selling pressure on the AUD. Concerns over China’s sluggish economy were heightened by the People’s Bank of China’s (PBoC) unexpected rate drop on Monday.
Additionally, The gloomy prognosis for the Chinese economy has triggered a drop in iron ore prices, putting additional pressure on the Australian dollar. Iron ore prices fall toward $108.00, reaching their lowest level in three weeks. This drop is especially significant for Australia, the greatest exporter of this precious metal.
The US dollar may be under pressure due to rising expectations of a Fed rate cut in September.
The US Dollar (USD) may suffer as bets on a Federal Reserve (Fed) rate decrease in September rise, thus limiting the AUDUSD pair’s downside. Traders are looking forward to the Global Purchasing Managers Index (PMI) data release on Wednesday, which will provide new insights into the economic circumstances in the United States.
According to CME Group’s FedWatch Tool, markets now predict a 93.6% probability of a 25-basis-point rate drop at the September Federal Reserve meeting up from 88.5% the day before.
Daily Market Movers: The Australian dollar falls due to China’s mounting fears.
Australia’s Judo Bank Manufacturing PMI rose to 47.4 in July from 47.2 in June. Meanwhile, the Services PMI fell to 50.8 in July, from 51.2 in June. The Composite PMI also fell, down to 50.2 in July from 50.7 in June.
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“The interest rate reduction by the People’s Bank of China (PBoC) and the outcomes of the Third Plenum are too small to convince market players that the Chinese economy will accelerate significantly. is in the works,” said Joseph Capurso, head of international economics at the Commonwealth Bank of Australia.
People’s Bank of China (PBoC) has lowered one- and five-year loan prime rates by ten basis points, to 3.35% and 3.85%, respectively.
The People’s Bank of China (PBoC) has lowered one- and five-year loan prime rates by ten basis points, to 3.35% and 3.85%, respectively. Because China and Australia are close trading partners, any changes in the Chinese economy could have an influence on Australian markets.
President of the Federal Reserve Bank of New York, John Williams, remarked on Friday that the long-term trends that led to drops in neutral interest rates prior to the epidemic remain. remarked, “My own Holston-Laubach-Williams estimates for r-star in the United States, Canada, and the Euro area are about the same level as they were before the pandemic,” according to Bloomberg data.
Reuters cited Sean Langcake, the head of macroeconomic forecasting According to Oxford Economics Australia, “The current rate of employment growth suggests demand is resilient and cost pressures will persist.” We believe the RBA will maintain the course and leave interest rates on hold, but August is undoubtedly a live meeting.
Fed Chair Powell noted last week that the three US inflation readings this year “add somewhat to confidence” that inflation is on track to meet the Fed’s target on a sustained basis, implying that interest rate cuts may be on the way.
