The AUD/USD pair weakened near 0.6770 in the early Asian session on Monday, breaking a four-day winning streak. The US Dollar’s recovery offered some support to the pair, with upcoming Chinese economic data and US NY Empire State Manufacturing Index and a speech by Federal Reserve’s Mary Daly scheduled for later in the day.
Last Friday, US PPI climbed more than expected in June, but had little impact on the USD. The PPI for final demand rose 0.2% MoM and 2.6% YoY in June. Additionally, the preliminary Michigan Consumer Sentiment Index came in below expectations.
Rising bets on a Fed rate cut in September due to softer US inflation figures may limit the Greenback’s upside, benefiting AUD/USD. Traders have priced in nearly 80% odds for a 25 bps cut in September.
UBS FX strategists anticipate a rate hike by the RBA in August following stronger inflation data for May. This could support the Aussie in the near term. Traders will also be monitoring China’s GDP, Industrial Production, and Retail Sales data for further direction.
Factors influencing the Australian Dollar include RBA interest rates, Chinese economy health, Iron Ore prices (Australia’s largest export), Trade Balance, and market sentiment. China’s economic performance directly impacts the AUD due to its status as Australia’s largest trading partner. Iron Ore prices and Trade Balance also play a significant role in determining the AUD’s value.