AUD/USD picks up from two-month lows at 0.6415 ahead of US data

The Aussie Dollar attempts to bounce up from two-month lows with US PMI, Jobless Claims on focus.
A moderate improvement in Australia's business activity has provided some support to the AUD.
Investors remain wary of betting against the US Dollar ahead of Fed Powell's speech on Friday.

Guillermo Alcala FXStreet

The Aussie Dollar is attempting to regain lost ground against its US counterpart on Thursday, following a 1.75% sell-off in the last five trading days. A significant improvement in Australian business activity has provided some support to the Aussie ahead of the release of US PMI and weekly Jobless claims figures.

Manufacturing activity accelerated to a 59.2 pace in August in Australia, according to preliminary S&P Global Purchasing PMI figures released late Wednesday, while the services sector’s activity improved to 55.1 from 54.1 in the previous month.

Later today, the Preliminary US PMIs are expected to reveal a moderate slowdown in the services sector's activity to 54.2 from 55.7 in July, while manufacturing activity is seen contracting at a slower pace to 49.5, beyond the previous month's 49.8 reading.

Somewhat earlier, US Jobless Claims are expected to show an uptick to 225,000 from 224,000 in the previous week, adding to evidence of a softening labour market.

The US Dollar’s reaction to these releases, however, is likely to remain limited as traders will be awaiting Fed Powell’s speech on Friday to make investment decisions. With the market pricing an 80% chance of a rate cut in September, Powell’s comments will be analysed for confirmation of those views.

Economic Indicator

S&P Global Manufacturing PMI

The S&P Global Manufacturing Purchasing Managers Index (PMI), released on a monthly basis, is a leading indicator gauging business activity in the US manufacturing sector. The data is derived from surveys of senior executives at private-sector companies from the manufacturing sector. Survey responses reflect the change, if any, in the current month compared to the previous month and can anticipate changing trends in official data series such as Gross Domestic Product (GDP), industrial production, employment and inflation. A reading above 50 indicates that the manufacturing economy is generally expanding, a bullish sign for the US Dollar (USD). Meanwhile, a reading below 50 signals that activity in the manufacturing sector is generally declining, which is seen as bearish for USD.

Economic Indicator

Initial Jobless Claims

The Initial Jobless Claims released by the US Department of Labor is a measure of the number of people filing first-time claims for state unemployment insurance. A larger-than-expected number indicates weakness in the US labor market, reflects negatively on the US economy, and is negative for the US Dollar (USD). On the other hand, a decreasing number should be taken as bullish for the USD.

Why it matters to traders?

Every Thursday, the US Department of Labor publishes the number of previous week’s initial claims for unemployment benefits in the US. Since this reading could be highly volatile, investors may pay closer attention to the four-week average. A downtrend is seen as a sign of an improving labour market and could have a positive impact on the USD’s performance against its rivals and vice versa.

Author

Guillermo Alcala

FXStreet

Graduated in Communication Sciences at the Universidad del Pais Vasco and Universiteit van Amsterdam, Guillermo has been working as financial news editor and copywriter in diverse Forex-related firms, like FXStreet and Kantox.

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