Australian Dollar steadies as US Dollar strengthens amid rising Treasury yields
- Australian Dollar stays silent despite Gross Domestic Product expanding 0.6% QoQ in Q2.
- China’s Caixin Services PMI rose to 53.0 in August, against the expected 52.5 reading.
- The CME FedWatch tool indicates that more than 91% of a 25-basis-point Fed rate cut is expected in September.
The Australian Dollar (AUD) moves little against the US Dollar (USD) on Wednesday after registering 0.5% gains in the previous session. The AUD/USD pair remains subdued following Australia’s Q2 Gross Domestic Product and China’s Caixin Services Purchasing Managers’ Index (PMI). The US JOLTS Job Openings and the Fed Beige Book will be eyed later in the day.
The Australian Bureau of Statistics (ABS) reported that Gross Domestic Product rose 0.6% quarter-over-quarter in the second quarter, following the 0.3% growth in Q1 (revised from 0.2%). This reading came in stronger than the expectations of 0.5% expansion. The annual Q2 GDP grew by 1.8%, compared with the 1.4% growth in Q1 (revised from 1.3%), and was above the consensus of a 1.6% increase.
China’s Caixin Services Purchasing Managers’ Index unexpectedly rose to 53.0 in August from 52.6 in July. The data came in above the market forecast of 52.5 in the reported period.
The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, is extending gains for the second successive day and trading around 98.50 at the time of writing. The US Dollar gains ground amid rising yields on US Treasury bonds, with the 2-year at 3.65% and the 10-year at 4.28% standing at the time of writing. Rising Treasury yields make US assets more attractive to global investors, hence capital inflows increase demand for USD.
However, the upside of the Greenback could be restrained due to the prospect of the US Federal Reserve (Fed) rate cut this month, along with the dovish remarks from Fed officials. The CME FedWatch tool indicates pricing in more than 91% of a 25-basis-point (bps) rate cut by the Fed at the September policy meeting, up from an 86% chance a day ago.
Traders are also awaiting labor market data this week that could shape the US Federal Reserve’s (Fed) policy decision in September. Key reports include ADP Employment Change, Average Hourly Earnings, and Nonfarm Payrolls for August.
Australian Dollar struggles despite fading RBA rate cut bets
- Australia’s Monthly Consumer Price Index rose 2.8% year-over-year in July, beating both the previous 1.9% increase and the 2.3% forecast. The hotter inflation in July dampened the likelihood of a Reserve Bank of Australia (RBA) rate cut anytime soon, continuing to provide support for the Australian Dollar.
- Building Permits in Australia declined 8.2% month-over-month in July, surpassing the expected decline of 4.8%. The previous reading indicated an increase of 11.9%. Meanwhile, the annual data showed an increase of 6.6%, following a previous 27.4% rise, as data showed on Monday.
- China’s Caixin Manufacturing Purchasing Managers’ Index (PMI) jumped to 50.5 in August from 49.5 in July, according to the latest data released on Monday. It is worth noting that any change in the Chinese economy could influence AUD as China and Australia are close trading partners.
- China’s National Bureau of Statistics (NBS) reported on Sunday that the country’s Manufacturing PMI rose to 49.4 in August from 49.3 in July. The reading came in weaker than the expectation of 49.5 and marked five consecutive months of decline. However, the NBS Non-Manufacturing PMI climbed to 50.3 in August, versus 50.1 prior and in line with the market consensus.
- Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers Index (PMI) improved to 48.7 in August from 48.0 in July but falling short of expected 49.0 reading. Meanwhile, ISM Manufacturing Employment Index edged higher to 43.8 from 43.4 prior, while the Manufacturing Prices Paid, the inflation component, retreated to 63.7 from 64.8.
- US Treasury Secretary Scott Bessent said on Tuesday that he expects the Supreme Court will approve Trump’s use of a 1977 emergency powers law to slap the tariffs on trading partners, and the administration has a backup plan if it does not. Trump, meanwhile, pledged to seek an “expedited ruling” from the Court.
- Market concerns increased about the Fed’s independence amid uncertainty over the legality of Trump’s dismissal of Fed Governor Lisa Cook, after a court hearing on Friday concluded without a decision on whether to temporarily halt the move.
- US Treasury Secretary Scott Bessent acknowledged on Monday that the Federal Reserve should be politically independent, but offered little clarity on his vague claim that the Fed has “made a lot of mistakes”, outside of not obeying President Trump’s demands for lower interest rates.
- US Personal Consumption Expenditures (PCE) Price Index held steady at 2.6% year-over-year in July, coming in line with the market expectation. The US core PCE Price Index, which excludes volatile food and energy prices, rose 2.9% YoY in July, as expected, following June’s increase of 2.8%. On a monthly basis, the core PCE Price Index rose 0.2% and 0.3%, respectively.
- San Francisco Fed President Mary Daly said on Sunday that policymakers will be ready to cut interest rates soon, adding that inflation stemming from tariffs will likely prove temporary, per Bloomberg.
- Fed Governor Christopher Waller said on Thursday that he would support an interest-rate cut in the September meeting and further reductions over the next three to six months to prevent the labor market from collapsing, per Reuters.
Australian Dollar tests nine-day EMA support ahead of 0.6500
The AUD/USD pair is trading around 0.6520 on Wednesday. The technical analysis of the daily chart shows the pair has broken below the ascending trendline, suggesting a potential for a momentum shift to bearish from bullish. However, the pair is still positioned above the nine-day Exponential Moving Average (EMA), indicating short-term price momentum is stronger. A break below this level would indicate the bearish confirmation.
The primary support lies at the nine-day EMA of 0.6516, followed by the 50-day EMA at 0.6502. A break below this crucial support zone would cause the emergence of a bearish bias and prompt the AUD/USD pair to test its three-month low of 0.6414, recorded on August 21.
On the upside, the AUD/USD pair could rebound above the ascending trendline around 0.6540 and support the pair to test the five-week high of 0.6568, reached on August 14, followed by the nine-month high of 0.6625, which was recorded on July 24.
AUD/USD: Daily Chart
Australian Dollar Price Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.11% | 0.18% | 0.27% | 0.09% | 0.01% | 0.11% | 0.13% | |
| EUR | -0.11% | 0.08% | 0.17% | -0.02% | -0.23% | -0.01% | 0.02% | |
| GBP | -0.18% | -0.08% | 0.08% | -0.09% | -0.30% | -0.08% | -0.05% | |
| JPY | -0.27% | -0.17% | -0.08% | -0.19% | -0.36% | -0.26% | -0.14% | |
| CAD | -0.09% | 0.02% | 0.09% | 0.19% | -0.17% | 0.02% | 0.04% | |
| AUD | -0.01% | 0.23% | 0.30% | 0.36% | 0.17% | 0.06% | 0.24% | |
| NZD | -0.11% | 0.00% | 0.08% | 0.26% | -0.02% | -0.06% | 0.02% | |
| CHF | -0.13% | -0.02% | 0.05% | 0.14% | -0.04% | -0.24% | -0.02% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
