The AUD/USD gained traction in Wednesday's session, driven by a weaker USD. The US reported lower-than-expected PMIs, but its Services sector remained resilient. At the same time, the Australian figures also failed to live up to expectations—eyes on Jerome Powell’s speech on Friday.
The US S&P Global PMIs arrived weaker than anticipated. The Manufacturing PMI fell to 47, contrasting with the projected 49.3, whereas the Services index, though below expectations, stayed within the expansion range at 51. Despite reporting soft data, the US Service sector remains resilient. At the same time, the British, German, and Australian Services index dropped below 50, and the USD may gain further traction as the US economy seems to be the last man standing.
Reacting to the weak economic activity data, the 2, 5, and 10-year US Treasury yields show sharp declines of more than 1.50%, suggesting that the markets are betting that the Federal Reserve (Fed) won’t be as aggressive as expected for the rest of the year. That being said, Jerome Powell’s speech on Friday at the Jackson Hole Symposium will be key for investors to continue modelling their expectations for the upcoming Fed meetings.
On the AUD’s side, the Manufacturing and Services PMIs from Australia from August were lower than expected at 49.4 and 46.7, respectively. China’s weakening and the contractive monetary policy from the Reserve Bank of Australia (RBA) are the main reasons for the softening of the Australian economy
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