AUD/USD weakens below 0.6650 amid firmer US Dollar, stronger US PMI data

The AUD/USD pair trades in negative territory for the third consecutive day around 0.6640 during the early Asian session on Monday. The downtick of the pair is backed by the stronger US Dollar (USD) after the optimistic US S&P Purchasing Managers Index (PMI) data for June.

Business activity in the United States rose to a 26-month high in June amid a rebound in employment. S&P Global revealed on Friday that its flash Composite PMI rose to 54.6 in June from a final reading of 54.5 in May, the highest level since April 2022. Meanwhile, the Manufacturing PMI improved to 51.7 in June from 51.3 in the previous reading and was above the consensus of 51. The Services PMI increased to 55.1 in June from 54.8, beating the estimation of 53.7. The stronger-than-expected US PMI data provide some support to the Greenback and create a headwind for AUD/USD.

The Federal Reserve (Fed) officials emphasized that they will maintain a data-dependent approach as they need more confidence that inflation will move towards the Fed’s 2% target before they can cut rates. Investors are now currently pricing in nearly 64% odds of a Fed rate cut in September, according to CME FedWatch Tool.

On the Aussie front, the softer preliminary Australian PMIs from Judo Bank for June indicated fragility in the Australian economy and exerted some selling pressure on the Australian Dollar (AUD). However, the hawkish stance from the Reserve Bank of Australia (RBA) is likely to underpin the Aussie and cap the downside for AUD/USD in the near term. The RBA Governor Michele Bullock said during her latest press conference that the Board discussed potential rate hikes, dismissing considerations of rate cuts in the near term.