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AUD/USD Stagnates Below The 0.6500 Mark And Hardly Responds To a Minor Improvement In China's PMI
The AUD/USD pair struggles to acquire traction and is influenced by a number of factors. A slight USD depreciation provides support, but China's economic difficulties continue to limit the upside. The superior-than-anticipated Caixin China Manufacturing PMI fails to impress investors in advance of the NFP.
The AUD/USD pair lacks intraday directionality on Friday and oscillates between modest gains and minor losses during the Asian session. In the meantime, spot prices remain below the psychological mark of 0.65 and move little in response to Chinese macroeconomic data.
The manufacturing sector in China returned to expansion territory in August, defying expectations for a second consecutive month of contraction, according to a survey conducted by Caixin. In fact, the Caixin China Manufacturing PMI increased to 51.0 from 49.2 in July, but this does little to alleviate concerns about the deteriorating conditions in the second-largest economy in the world. This fails to provide any meaningful impetus for the China-proxy Australian Dollar (AUD), but a modest decline in the US Dollar (USD) provides support for the AUD/USD pair.
The USD Index (DXY), which measures the Greenback against a basket of currencies, is unable to capitalise on yesterday's strong rebound from a two-week low due to uncertainty over the Federal Reserve's (Fed) future rate-hike path. US macro data released earlier this week, including the ADP report and the second GDP estimate for the second quarter, indicated that the resilient US economy is beginning to lose momentum. Nonetheless, the US PCE Price Index data released on Thursday leaves the door open for one more 25-bps Fed rate hike before the end of the year.
In fact, the headline US PCE Price Index increased from 3% to 3.3% year-over-year in July. In addition, the Fed's preferred measure of inflation, the annual Core PCE Price Index, rose by 4.2%, a slightly faster rate than the 4.1% increase recorded in June. Additional data from the report revealed that Personal Income increased by 0.2%, while Personal Spending increased by 0.8% on a monthly basis – the highest reading since January. The USD bulls, on the other hand, prefer to remain on the periphery until the highly anticipated US employment report for the month of May.
The well-known NFP report is expected to be released later during the early North American session and will have a significant impact on the Fed's policy outlook. In turn, this will drive USD demand and provide significant impetus for the AUD/USD pair. Nonetheless, market prices appear poised to close in the black for the first time in the previous six weeks as attention shifts to the RBA's policy decision on Tuesday.
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