Australian Dollar rallies above 0.7150 as the US Dollar bleeds amid bond buybacks

AUD/USD hits session highs above 0.7150, approaching three-month highs in the 0.7200 area.
Australia's Flash PMI figures show mild activity growth, but failed to boost the Aussie.
The US Dollar remains on the defensive, hurt by US Treasury's bond buyback plans.

Guillermo Alcala FXStreet

The Australian Dollar (AUD) accelerated its rally against the US Dollar (USD) on Friday, hitting session highs above 0.7150 for the first time since early June and drawing closer to a three-month top, in the 0.7200 area. Australia’s business activity figures highlighted a steady growth in July, although the main driver for the pair remains the US Dollar’s weakness following the US Treasury’s announcement of a plan to double bond buybacks from September on.

Preliminary Purchasing Managers Index (PMI) Data released by S&P Global earlier on the day revealed that Australia’s manufacturing sector remained growing at a steady 52.0 rate in July, while services activity slowed down to 52.9 from 53.6 in June. The Composite PMI ticked down to 52.5 from 53.2 in the previous month.

Dollar softens as markets eye US Treasury moves

The US Dollar, on the contrary, keeps bleeding, weighed by the US Treasury's plan to boost repurchases of long-term securities. Analysts at MUFG observe that, with investors focused on "potential further action by the US Treasury to stem the decline in UST bond yields," US Treasury Secretary Scott Bessent's pledges to "increased focus on fiscal consolidation" will likely be taken with scepticism by the market.

Against this background, MUFG experts hold doubts that any forthcoming measures will materially alter the fiscal trajectory or provide lasting support for the Dollar.

On the macroeconomic front, US preliminary S&P Global Purchasing Managers' Index (PMI) figures are expected to show a moderate slowdown of business activity, but at levels consistent with healthy growth. The Services PMI is seen easing to 54.0 from 54.6 in June, while Manufacturing activity is expected to have remained at 53.9, unchanged from the previous month.

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

S&P Global Services PMI

The S&P Global Services Purchasing Managers Index (PMI), released on a monthly basis, is a leading indicator gauging business activity in the US services sector. As the services sector dominates a large part of the economy, the Services PMI is an important indicator gauging the state of overall economic conditions. The data is derived from surveys of senior executives at private-sector companies from the services 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 services economy is generally expanding, a bullish sign for the US Dollar (USD). Meanwhile, a reading below 50 signals that activity among service providers is generally declining, which is seen as bearish for USD.

GBP/USD advances to six-month high above 1.3650

GBP/USD extends its weekly rally and trades at its highest level since February above 1.3650 as the upbeat PMI data supports Pound Sterling despite disappointing Retail Sales figures. Meanwhile, the US Dollar (USD) struggles to stay resilient against its peers following the Treasury Department's decision to boost long-term bond purchases earlier in the week, helping the pair gather bullish momentum ahead of US PMI data.

EUR/USD rises above 1.1700 ahead of US PMI data

EUR/USD gains traction in the European session on Friday and trades above 1.1700 despite the mixed PMI prints from Germany and the Eurozone. Investors await preliminary August PMI surveys for the US, while the persistent USD weakness allows the pair to keep cling to its bullish stance.

Gold tests three-month highs near $4,600 as the US Dollar dives

Gold extends gains on Friday, with bulls aiming for a retest of the $4,600 resistance area, the top of the last six months' trading range. Precious metals are gaining momentum, favoured by a sharp US Dollar selloff, following the announcement of a US Treasury plan to boost liquidity to repurchase long-term securities.

Crypto Today: Bitcoin, Ethereum, XRP bulls accelerate rally amid rising ETF inflows

The cryptocurrency market remains bullish on Friday, led by Bitcoin’s surge above $77,000. Altcoins, including Ethereum and Ripple, mirror BTC’s positive outlook, trading near $2,400 and $1.35, respectively.

S&P Global US PMIs expected to ease slightly in August, still showing solid growth

S&P Global will release the preliminary figures of August’s US Purchasing Managers' Indices (PMIs). For August, the market consensus anticipates a mild slowdown in economic activity, with the Manufacturing PMI ticking down to 53.8 from July’s 53.9 reading and the Services PMI easing to 54.0 from last month’s 54.6.

$20 billion offered, $2 billion taken: Why Treasury doubled its buyback cap

The US Treasury moved off its own calendar on Wednesday, and that is the part worth sitting with. At 12:32 GMT, the department said it would at least double the size of liquidity support buyback operations in the 10-year to 20-year and 20-year to 30-year sectors, lifting the maximum from $2 billion per operation to at least $4 billion, effective September 9 and running to November 4.