AUD/USD Narrowly Maintains 0.6600 In The Midst Of a Us Credit Downgrade, With All Eyes On The US ADP Employment Change

AUD/USD maintains a defensive stance around 0.6615-20 while nursing its wounds at the lowest level in a month in the Asia-Pacific region on Wednesday morning. In doing so, the AUD/USD pair struggles to applaud the US Dollar's retreat from a multi-day high while maintaining the RBA-induced fears. Nonetheless, the US Dollar's most recent decline may be attributable to an unexpected US credit rating reduction, as well as the recently pessimistic Federal Reserve (Fed) discussions and the mixed US data.

Australia's AiG Industry Index for June falls to -14.7 from -11.9 while AiG Manufacturing PMI for the same month plummets to -25.6 from -19.8 and exerts downward pressure on the AUD/USD exchange rate as of late.

Tuesday night, Fitch Ratings downgrades the United States government's credit rating from AAA to AA+, citing concerns of a debt crisis as the primary catalyst. In response to the announcements, the White House and US Treasury Secretary Janet Yellen rushed to criticise the action and defend the US Dollar, but ultimately failed.

Prior to that, negative remarks from the president of the Atlanta Federal Reserve Bank, Raphael Bostic, supported the AUD/USD pair's recovery. However, Fed's Bostic rules out a September rate hike and warns of the dangers of overtightening.

It should be noted, however, that the RBA's second consecutive inaction contrasts with the expectation of a Fed rate rise in September, which gives the AUD/USD bears reason for optimism, particularly in light of negative catalysts from China.

The Reserve Bank of Australia (RBA) defied market expectations by maintaining benchmark interest rates at 4.1% on Tuesday, marking the second consecutive status quo after challenging two hawkish surprises at the most recent monetary policy meeting in July. Governor Phillip Lowe of the Australian central bank stated in the Monetary Policy Statement that "further tightening of monetary policy may be required to ensure that inflation returns to target within a reasonable timeframe, but this will depend on the data and the evolving risk assessment."

In response to the US's tech and trade war tactics, China announced export restrictions on drones, citing "national security" measures. China Caixin Manufacturing PMI for July fails to match its optimistic NBS counterpart, falling to 49.2 from 50.5 in June, below market expectations of 50.3 and marking the lowest level since January.

Elsewhere, the US ISM Manufacturing PMI for July improves from 46.0 to 46.4, as opposed to the expected 46.8. Further information reveals that the ISM Manufacturing Employment Index decreased to 44.4 from 48.0 expected and 48.1 previously, while the ISM Manufacturing Price Paid Index rose to 42.6 from 41.8, compared to 42.8 market expectations. In addition, the US JOLT Job Openings for June decreased to 9.582M from 9.62M expected and 9.616M previous (revised) readings.

Wall Street closed with a divided performance, and US Treasury bond yields rose, but S&P500 Futures fell 0.34 percent intraday as of press time.

With a light calendar, the AUD/USD may be influenced by the market's reaction to the US rating reduction and a cautious mood ahead of the US ADP Employment Change. Nevertheless, the ADP data can stimulate US Dollar supporters if they match or fall below the pessimistic forecasts of 189K for July compared to 497K previously.