AUD/USD Persists Below 0.640 After Weak Australian Economic Data, With Attention Shifting To The RBA

AUD/USD fluctuates near 0.6380 during Thursday's Asian session, trading close to the Year-To-Date (YTD). As market participants anticipate the Federal Reserve (Fed) to maintain interest rates at a higher level for an extended duration, the stronger US Dollar (USD) is lending support to the decline of the AUD/USD pair. In addition, Australia's negative Trade Balance (MoM) for July is reduced to $8,039 million from the anticipated $10 million. The previous month's balance was reported at 11,321,000,000 USD.

The Australian Dollar (AUD) experienced modest support due to Australia's upbeat Gross Domestic Product (GDP) for the second quarter released on Wednesday. The Gross Domestic Product (YoY) increased by 2.1%, exceeding expectations of 1.7% growth. The growth rate in the previous quarter was 2.4%. GDP (QoQ) growth remained unchanged at 0.4%, contrary to market expectations of 0.3%.

However, Australian Treasurer Jim Chalmers stated, "The slowdown in China's economy and higher interest rates at home will put significant pressure on the Australian economy." Additionally, Chalmers expressed confidence that Australia could avoid a recession.

The escalation of trade tensions between the United States and China could operate as a headwind for the AUD/USD pair. The statement of US Commerce Secretary Gina Raimondo, as reported by Reuters. Until the ongoing evaluation by the US Treasury Office is concluded, Raimondo does not anticipate any changes to the US tariffs imposed on China during Trump's administration.

In contrast, the US ISM Services PMI rose to a six-month high of 54.5 in August, surpassing expectations of 52.5 and 52.7. In addition, the S&P Global Composite and Services PMIs decreased to 50.2 and 50.5, respectively, from 50.4 and 51.0, as predicted by the market. It is important to note that moderate US data provided support for the dollar.

In addition, investors are pricing in the possibility of a 25 basis point (bps) increase in interest rates by the end of 2023. This hawkish sentiment continues to support US Treasury yields, boosting USD supporters' confidence. The 10-year US bond yield increased by 0.23 percentage points to 4.29 percent. The US Dollar Index (DXY), which measures the value of the Greenback relative to six other main currencies, fluctuates around 104.90.

Investors await China's trade data for August ahead of the Reserve Bank of Australia (RBA) Governor Philip Lowe's speech for guidance on the market. Nonetheless, the prevalent risk-averse sentiment and the strength of the US Dollar present substantial obstacles for AUD/USD advocates.