AUD/USD hovers around the 0.6800 mark on the first trading day of 2024, US PMI data eyed

The AUD/USD pair drifts lower on the first trading day in 2024 during the early Asian session on Tuesday. The markets remain quiet in the first week of the year. The pair currently trades around 0.6808, losing 0.04% on the day.

On Tuesday, the Australian Judo Bank final Manufacturing PMI for December 2023 came in at 47.6 from the flash reading of 47.8, weaker than the expectation of 47.7. The December Manufacturing Output Index backed to a historically low reading of 45.5. The report suggests that the manufacturing sector in Australia has shown a consistent easing trend throughout 2023, responding to monetary policy, with inflation aligned with the RBA's target levels. The sector's activity is gradually slowing down, and we estimate that this trend will continue through early 2024.

Furthermore, China’s National Bureau of Statistics (NBS) reported on Sunday that the NBS Manufacturing Purchasing Managers' Index (PMI) came in at 49.0 in December versus 49.4 prior, below the consensus of 49.5 in November. The NBS Non-Manufacturing PMI arrived at 50.4 in December from 50.2 in the previous reading, weaker than the expectation of 50.5.

On the USD’s front, the Chicago Purchasing Managers' Index eased from 55.8 in November to 46.9 in December, below the market consensus of 51.0. At the Federal Reserve (Fed) meeting in December 2023, the Fed delivered dovish remarks, and investors have priced in three rate cuts in 2024. According to the WIRP, the markets are pricing in 15% odds of a rate cut on January 31 and is nearly priced on March 20. This, in turn, exerts some selling pressure on the US Dollar (USD) and acts as a tailwind for the AUD/USD pair. 

Looking ahead, December’s US S&P Global Manufacturing PMI will be released on Tuesday. On Wednesday, the Federal Open Market Committee (FOMC) minutes will be a closely watched event. Fed’s Barkin is set to speak on Wednesday and Friday, while Logan is scheduled to speak on Saturday.