AUD/USD Extends Losing Streak; Fed Powell's Speech Takes Center Stage

AUD/USD Declines for Fourth Straight Day Awaiting US S&P Global PMI Data

The AUD/USD pair is experiencing its fourth consecutive day of declines as markets anticipate the preliminary US S&P Global Purchasing Managers’ Index (PMI) data for August. Australia's PMI data for August showed strength, driven by robust demand in both the manufacturing and services sectors.

Investors are keenly awaiting Federal Reserve (Fed) Chair Jerome Powell’s address at the Jackson Hole Symposium. Despite stronger-than-expected preliminary Australian S&P Global Composite PMI data for August, the Australian Dollar (AUD) is facing selling pressure. The Composite PMI rose to 54.9 from 53.8 in July, fueled by substantial growth in manufacturing and services activities.

Meanwhile, the US Dollar (USD) is trading sideways ahead of the release of the flash United States (US) S&P Global PMI data for August. At the time of writing, the US Dollar Index (DXY), which measures the Greenback’s value against six major currencies, is hovering near its weekly high of 98.40.

Economists anticipate the Manufacturing PMI to register at 49.5, a decrease from July's 49.8, suggesting a quicker pace of contraction. The Services PMI is also projected to fall to 54.2 from the previous 55.7.

This week, the major focal point for the US Dollar will be Federal Reserve (Fed) Chair Jerome Powell’s speech at the Jackson Hole (JH) Symposium on Friday. Leading up to Powell’s address, traders are pricing in a 25 basis point (bps) interest rate cut to 4.00%-4.25% by the central bank, according to the CME FedWatch tool.

Minutes from the Federal Open Market Committee (FOMC) July policy meeting, released on Wednesday, revealed that a majority of officials, including Jerome Powell, advocated for maintaining steady interest rates until more clarity emerges regarding the “magnitude and persistence of higher tariffs’ effects on inflation”.

Analyzing Economic Performance and its Impact on AUD/USD

Exchange rate fluctuations like the AUD/USD reflect a complex interplay between economic indicators and central bank decisions. While strong Australian PMI data might provide temporary support for the Australian Dollar, the focus remains on Powell's speech for insights into the future direction of US monetary policy. Traders should monitor these developments closely to make informed decisions.

S&P Global Composite PMI: A Key Economic Indicator

The Composite Purchasing Managers Index (PMI), published monthly by S&P Global, is a crucial indicator of private-sector business activity in Australia for both the manufacturing and services sectors. Data is sourced from surveys of senior executives. Each response is weighted according to company size and its contribution to the total manufacturing or services output accounted for by the relevant sub-sector. Survey responses show any change in the current month relative 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 ranges from 0 to 100, with a level of 50.0 indicating no change from the previous month. A reading above 50 suggests that the Australian private economy is generally expanding, a bullish sign for the Australian Dollar (AUD). Conversely, a reading below 50 signals that activity is generally declining, which is considered bearish for the AUD.