Australian Dollar remains under pressure as PMI slows
AUD/USD loses ground for the third consecutive day, trading around 0.7110 during Asian hours on Wednesday.
The Australian Dollar (AUD) continues to face pressure as its Preliminary S&P Global Purchasing Managers' Index (PMI) for September slowed across key sectors. Manufacturing contracted, dropping to 49.3 from 52.0, while the Services PMI eased to 51.4 from 53.2. Consequently, Australia’s Composite PMI fell to 50.8 from 52.7. These figures come amid a strengthening US Dollar, driven by the Federal Reserve’s hawkish policy outlook, with the Fed raising its benchmark interest rate target by 25 basis points to 3.75%-4.00%.
The US central bank expects further rate hikes before the year ends, and markets are pricing in this outlook, with an 89.2% probability of a December rate increase according to the CME FedWatch Tool. Fed Chair Jerome Powell delivered a more hawkish tone, signaling a longer period of tighter monetary policy. This outlook weakens the AUD, as investors seek higher-yielding assets.
Additionally, Iron Ore prices, Australia’s largest export, play a role; higher prices benefit the AUD, while lower prices hurt it. China, Australia’s largest trading partner, also influences the AUD; a stronger Chinese economy increases demand for Australian goods and services, strengthening the currency.
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