Anna 
The Australian dollar (AUD) managed to break its recent losing streak on Thursday, finding support against the US dollar (USD). The pressure on AUD/USD has been driven by risk aversion and a generally bearish outlook for commodity markets. The Judo Bank Purchasing Managers’ Index (PMI) data, indicating a contraction in Australia’s services sector, added to the downward pressure.
The Judo Banking Services PMI revealed a contraction in Australia’s services sector in December, with the index at 47.1, below market expectations of 47.6. Additionally, the composite PMI declined to 46.9 from the previous 47.4, marking the fastest contraction in the services sector since Q3 2021. However, economist Matthew De Pasquale at Judo Bank suggests that while the Australian economy is slowing, the latest data does not indicate an accelerating downturn. The output and new orders indexes remained consistent with the Reserve Bank of Australia’s (RBA) anticipated soft landing scenario.
On the global front, the U.S. Dollar Index (DXY) continued its positive trajectory, supported by higher U.S. Treasury yields. The positive momentum received a boost from an improved ISM Manufacturing PMI report, revealing a rise to 47.4 in December from 46.7, surpassing the consensus of 47.1. However, job openings at JOLTS contracted to 8.79 million, slightly below the November forecast of 8.85 million.
Traders are now eagerly awaiting the release of U.S. labor market data, including ADP employment changes and initial jobless claims. The minutes from the December Federal Open Market Committee (FOMC) meeting indicated that participants believe policy rates are at or near the high point of the current tightening cycle. However, the trajectory of policy will depend on evolving economic conditions, emphasizing a data-driven approach.
