AUD Slips as Stronger Dollar, China Data Weigh

Key Moments

Risk Sentiment and Dollar Strength Weigh on AUD/USD

The AUD/USD pair came under renewed selling pressure during the Asian session on Wednesday, as the attempt to build on the prior day’s rebound from the 0.6865 area – identified as a three-month low – faded. The pair slipped back below the 0.6900 threshold in the latest trading and showed a muted reaction to the publication of China’s private manufacturing survey.

Fresh U.S. Dollar strength provided a key headwind for the Australian Dollar. The firmer Greenback, supported by geopolitical concerns and expectations for higher U.S. interest rates, limited any follow-through recovery in the AUD/USD cross and kept spot prices on the defensive.

China’s RatingDog Manufacturing PMI Softens

Data from RatingDog indicated that China’s Manufacturing PMI moderated to 51.7 in June from 52.2 in May. The release broadly matched market expectations but pointed to some loss of momentum in manufacturing activity.

This softer private survey followed official PMI figures published on Tuesday, which signaled that overall business activity barely expanded in the latest month, constrained by subdued domestic demand and weak consumer spending. The combination of these readings weighed on the Australian Dollar, often viewed as a proxy for exposure to China, and added to downside pressure on AUD/USD alongside the modest U.S. Dollar uptick.

Geopolitics and Fed Expectations Support the Greenback

Uncertainty around U.S.-Iran developments helped underpin the U.S. Dollar, which benefited from its relatively defensive appeal against a backdrop of elevated geopolitical risk and hawkish expectations for the U.S. Federal Reserve.

According to the article, U.S. negotiators Jared Kushner and Steve Witkoff arrived in Qatar on Tuesday to discuss implementation of an initial agreement aimed at ending the war in Iran. Iran, however, indicated it would not meet with the U.S. delegation, casting doubt on prospects for a durable settlement and sustaining a geopolitical risk premium that has favored the Greenback.

Labor Market Data Reinforce Fed Rate-Hike Bets

On the macro front, the latest U.S. Job Openings and Labor Turnover Survey (JOLTS) released on Tuesday showed that job openings rose to 7.594 million at the end of May, described as a two-year high. The data highlighted ongoing resilience in the U.S. labor market.

At the same time, renewed U.S.-Iran hostilities have stoked inflation concerns, reinforcing market expectations for a near-term rate increase by the Federal Reserve. These developments collectively acted as a supportive backdrop for the U.S. Dollar and contributed to the downward move in AUD/USD.

Upcoming U.S. Events in Focus

Market participants are now turning their attention to remarks from Fed Chairman Kevin Warsh at the European Central Bank (ECB) Forum in Sintra. His appearance is being watched for any additional signals on the policy outlook.

Later on Wednesday, the U.S. calendar includes the ADP report on private-sector employment and the ISM Manufacturing PMI, both of which are expected to provide fresh direction during the North American session. Looking ahead, focus is set to shift to the U.S. monthly employment release, the Nonfarm Payrolls (NFP) report, scheduled for Thursday.

About the RatingDog Manufacturing PMI

The RatingDog Manufacturing Purchasing Managers Index (PMI), released monthly by Caixin Insight Group and S&P Global, serves as a leading gauge of conditions in China’s manufacturing sector. It is based on survey responses from senior executives at private-sector and state-owned firms, comparing activity in the current month with the previous month.

Readings on this index range from 0 to 100. A level of 50.0 indicates no change from the prior month, values above 50 signal expansion in manufacturing, and figures below 50 point to contraction. An expansionary reading is typically interpreted as supportive for the Renminbi (CNY), while a contractionary reading is considered negative for CNY.