Disappointing Chinese manufacturing data and hawkish Fed remarks weigh on the Australian Dollar, offsetting stronger domestic inflation pressures.
AUD/USD holds around 0.7020 in Friday’s session, pressured by weaker-than-expected Chinese PMI data and hawkish Federal Reserve commentary. China’s Manufacturing PMI fell to 49.2 in July, missing the 50.0 consensus and signaling contraction, while Non-Manufacturing PMI dropped to 49.0, also below expectations.
The decline in Chinese activity raises concerns over demand in Australia’s largest trading partner, countering domestic inflation strength. Australia’s Producer Price Index rose to 3.6% YoY in Q2, up from 3.0%, indicating persistent inflationary pressures. However, the impact was muted by external headwinds.
The US Dollar gained support after Dallas Fed President Lorie Logan suggested monetary policy is not sufficiently restrictive, warning inflation risks remain elevated. She indicated a preference for a 25-basis-point rate hike, reinforcing expectations of tighter Fed policy.