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The Australian dollar (AUD) pared intraday gains and turned lower on Monday, as U.S. Treasury yields rose and the U.S. dollar held steady. Additionally, losses in Australia’s ASX 200 put further downward pressure on the Australian dollar, weakening AUD/USD. Traders may be awaiting key data from Australia, including services purchasing managers’ index (PMI) for February on Tuesday and fourth-quarter 2023 gross domestic product (GDP) on Wednesday.
Australia’s Melbourne Institute reported that inflation rose 4.0% year-on-year in February, providing some support to the Australian dollar. However, this increase was lower than the previous 4.6%. Building permits (monthly) fell 1.0% in January, contrary to expectations for a 4.0% rise. Still, the figure was an improvement from the previous decline of 10.1%. Separately, consumer price index (CPI) data released last week showed a rise of 3.4% in January, slightly below consensus expectations of 3.5%. The data supports the case for the Reserve Bank of Australia (RBA) to consider cutting interest rates later this year.
The U.S. Dollar Index (DXY) is likely to head lower as U.S. manufacturing contracted in February. Investors are closely watching upcoming economic data, including the ISM Services Purchasing Managers’ Index, ADP employment changes and February nonfarm payrolls.
