Australian Dollar Under Pressure as US Dollar Strengthens Again
The AUD/USD pair weakened to around the 0.7000 level during Monday's trading (August 3), falling approximately 0.30%. Pressure on the Australian dollar arose from a renewed strengthening of the US dollar, which offset support provided by Chinese economic data indicating continued expansion.
China's Caixin Manufacturing PMI fell to 50.9 in July from 51.7 in June, missing market expectations of 51.5. Despite the slowdown, the figure remained above the 50-point threshold, meaning China's manufacturing activity stayed in the expansion zone. This helped temper the Australian dollar's decline, given that China is Australia's largest trading partner.
Comments from the Reserve Bank of Australia (RBA) also continued to support expectations of a restrictive monetary policy stance. RBA Deputy Governor Sarah Hunter stated that the recent slowdown in inflation was primarily driven by falling fuel prices, while core inflation remained above the central bank's 2%–3% target range. Consequently, the market continues to price in the possibility of another interest rate hike this year.
Meanwhile, the US dollar regained support after an earlier period of weakness. Investors remain focused on geopolitical developments after US President Donald Trump stated he had suspended plans for a military strike on Iran to allow room for negotiations regarding Iran's nuclear program and the full reopening of the Strait of Hormuz.
However, Iranian officials denied Trump's claims, calling them untrue. Tehran also stated that its armed forces remain on high alert. These conflicting statements have kept market sentiment cautious and limited investor appetite for risk assets.
The market is also assessing the impact of the OPEC+ decision to increase production in September. That move has put downward pressure on oil prices and lowered expectations for further monetary tightening by the Federal Reserve.
Regarding market impact, the AUD/USD pair remains potentially volatile as it awaits the US ISM Manufacturing PMI data on Monday evening and the Nonfarm Payrolls (NFP) report on Friday. If US data is strong, the US dollar will strengthen again and put pressure on the Aussie. However, if the data weakens, the AUD/USD pair could see room for a rebound. (asd)
Source: Newsmaker.id
