Australian Dollar comes under pressure as US Dollar regains ground

On Monday, the Australian Dollar (AUD) slipped to approximately 0.7000 against the US Dollar (USD), a 0.30% decline from the previous day. This weakening was driven by a US Dollar rebound that surpassed the support from Chinese economic data for the AUD. China's Manufacturing Purchasing Managers' Index (PMI) declined to 50.9 in July, below the anticipated 51.5.

However, the index remained above the 50 mark, indicating ongoing growth in manufacturing in Australia's primary trading partner, which helped curb AUD losses. The Reserve Bank of Australia (RBA)'s remarks also fueled expectations of a tighter monetary policy. RBA Assistant Governor Sarah Hunter indicated that inflation's recent moderation was primarily due to lower fuel prices, with inflationary pressures still above the central bank's 2%-3% target.

Meanwhile, the US Dollar (USD) gained strength following its recent drop. Investors remained vigilant over geopolitical events, following US President Donald Trump's suspension of planned military strikes against Iran to facilitate talks on Iran's nuclear program and the Strait of Hormuz's reopening. Yet, Iranian officials disputed Trump's claims, maintaining a state of alert in their armed forces.

These divergent statements kept market sentiment on edge, curbing investors' risk appetite. Market participants are also evaluating the Organization of the Petroleum Exporting Countries and its allies (OPEC+) production increase in September, which lowered oil prices and reduced hopes for more Fed tightening. The focus now shifts to the Institute for Supply Management (ISM) Manufacturing PMI release later on Monday and the upcoming US Nonfarm Payrolls (NFP) report on Friday, potentially offering new insights into the Fed's next monetary policy moves.