Australian Dollar remains depressed below 0.6900 vs firmer USD after China's PMI

AUD/USD attracts fresh sellers on Wednesday as a combination of factors underpins the USD.
The Iran uncertainty and rising Fed rate hike bets continue to act as a tailwind for the buck.
Spot prices move little following the release of in-line China’s RatingDog Manufacturing PMI.

Haresh Menghani FXStreet

The AUD/USD pair struggles to capitalize on the previous day's goodish rebound from the 0.6865 region, or a three-month low, and meets with a fresh supply during the Asian session on Wednesday. Spot prices weakened back below the 0.6900 mark in the last hour and moved little following the release of China's private manufacturing PMI.

The latest data published by RatingDog showed that China's Manufacturing PMI eased to 51.7 in June from 52.2 in May. This comes on top of official PMIs released on Tuesday, which showed that business activity barely expanded last month on the back of sluggish domestic demand and weak consumer spending, and undermines the China-proxy Aussie. This, along with a modest US Dollar (USD) uptick, exerts some downward pressure on the AUD/USD pair.

The uncertainty over US-Iran talks benefits the Greenback's relatively safe-haven status amid hawkish US Federal Reserve (Fed) expectations. US negotiators Jared Kushner and Steve Witkoff arrived in Qatar on Tuesday for talks about the implementation of an initial deal to end the war in Iran. The latter, however, said that it would not meet with US envoys, clouding the prospects for lasting peace between the two countries and keeping geopolitical risk premiums in play.

Meanwhile, the US Job Openings and Labor Turnover Survey (JOLTS) showed on Tuesday that job openings edged up to a two-year high level of 7.594 million at the end of May, pointing to a still resilient labor market. Moreover, renewed US-Iran hostilities have revived inflation fears, boosting bets for an imminent rate hike by the US Federal Reserve (Fed). This is seen as another factor acting as a tailwind for the USD and contributing to the AUD/USD pair's slide.

Traders now look to Fed Chairman Kevin Warsh's appearance at the European Central Bank (ECB) Forum in Sintra. Adding to this, Wednesday's US economic docket, featuring the release of the ADP report on private-sector employment and the ISM Manufacturing PMI, should provide some impetus later during the North American session. The focus will then shift to the key US monthly jobs data – popularly known as the Nonfarm Payrolls (NFP) report on Thursday.

Economic Indicator

RatingDog Manufacturing PMI

The RatingDog Manufacturing Purchasing Managers Index (PMI), released on a monthly basis by Caixin Insight Group and S&P Global, is a leading indicator gauging business activity in China’s manufacturing sector. The data is derived from surveys of senior executives at both private-sector and state-owned companies. 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.The index varies between 0 and 100, with levels of 50.0 signaling no change over the previous month. A reading above 50 indicates that the manufacturing economy is generally expanding, a bullish sign for the Renminbi (CNY). Meanwhile, a reading below 50 signals that activity among goods producers is generally declining, which is seen as bearish for CNY.

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