AUD/USD posts modest gain above 0.6670, RBA rate decision, US ISM Services PMI eyed
- AUD/USD extends its gain near 0.6672 in early Monday.
- Market players raise the speculation that the Fed could begin cutting interest rates as early as March 2024.
- The Reserve Bank of Australia (RBA) is likely to keep cash rates unchanged at 4.35%.
- Traders will monitor the RBA rate decision, US ISM Services PMI on Tuesday.
The AUD/USD pair posts modest gains during the early Asian session on Monday. The uptick of the pair is bolstered by the weaker US Dollar (USD) and dovish messages from Federal Reserve (Fed) officials. Market players await the Reserve Bank of Australia (RBA) interest rate decision on Tuesday, which is likely to keep the rate unchanged. The pair currently trades near 0.6672, losing 0.01% on the day.
The 10-year US Treasury bond yield fell after the downbeat data and dovish comments from the Federal Reserve (Fed). While traders raise the speculation that the Fed could begin cutting interest rates as early as next March, Fed Chair Jerome Powell pushed back the odds that the central bank won the battle with inflation. Powell further stated on Friday that it was premature to rule out additional rate hikes or start discussing cuts.
About the data, US ISM Manufacturing for November came in weaker than expected, flat at 46.7. The Manufacturing Employment Index fell to 45.8 versus 46.8 prior. Prices Paid were considerably higher than expected, growing from 45.1 to 49.9. Finally, the New Orders Index rose to 48.3 in November from the previous reading of 45.5.
On the Aussie front, the market anticipates the RBA to keep cash rates unchanged, with downward surprises in the October monthly CPI and Retail Sales data supporting this view. Additionally, RBA Governor Michele Bullock Governor Michele Bullock has offered hawkish messages since taking over in mid-September, which lift the Australian Dollar (AUD) and act as a tailwind for AUD/USD.
Looking ahead, traders will monitor the Australian TD Securities inflation data on Monday. The attention will shift to the RBA monetary policy meeting on Tuesday. Also, the US ISM Services PMI data will be released on Tuesday. These events could trigger volatility in the market. Market players will take cues from the data and find trading opportunities around the AUD/USD pair.