AUD/USD extends its pullback toward the 0.6990 area during Monday’s American session after stronger-than-expected United States (US) manufacturing data reinforced the US Dollar (USD).
The pair had rallied above 0.7050 at the start of trading this week but failed to sustain gains as investors reassessed the Federal Reserve (Fed) outlook following resilient economic activity
The ISM Manufacturing Purchasing Managers Index (PMI) rose to 55.6 in July, beating market expectations of 54.0 and improving from 53.3 in June. Meanwhile, the New Orders Index increased to 56.7 from 56.0, pointing to solid demand across the manufacturing sector. The Prices Paid Index eased to 71.1 from 73.0, although it remained well above the 50 threshold, suggesting inflationary pressure continues to persist despite some moderation.
The stronger ISM figures prompted a rebound in US Treasury yields and supported the Greenback, weighing on risk-sensitive currencies such as the Australian Dollar (AUD). However, the softer reading in the Prices Paid component could temper expectations of an even more aggressive Fed stance if inflation continues to cool gradually. Attention now turns to the Asia-Pacific session, where Australia will release the final S&P Global Services and Composite PMIs for July.