AUD/USD moves below 0.6450 ahead of the RBA decision
- AUD/USD trades lower around 0.6430 after China’s downbeat Caixin Services PMI.
- Economists anticipate that RBA will keep key interest rates at 4.10%.
- Traders seek RBA’s tone for clear indications of future rate hikes.
AUD/JPY retreats from the previous day’s gains, trading lower around 0.6430 during the Asian session on Tuesday. The pair is experiencing downward pressure ahead of the key Reserve Bank of Australia (RBA) Interest Rate Decision. Furthermore, China’s Caixin Services PMI for August declined to the reading of 51.8 from 54.1 prior. The reduction in the Chinese services economy weighs on the pair.
According to a Reuters poll, economists are forecasting no change in interest rates on Tuesday, as inflation appears to be moderating, and they expect the rate to remain at 4.10%. All eyes will be on the Reserve Bank of Australia (RBA) Statement's tone for clear indications of future rate hikes, potentially providing support for the Australian Dollar (AUD) to maintain its strength.
The Aussie pair is unable to sustain support from China's stimulus measures and the agreement between Country Garden and creditors for an extension on onshore debt repayments worth 3.9 billion yuan ($536 million) boosted the market optimism.
As said, China's willingness to open up its services industry, coupled with advancements in manufacturing activities, adds to a series of measures aimed at reducing mortgage rates and injecting more liquidity into the economy to underpin the AUD/USD pair.
US Dollar Index (DXY), which compares the Greenback against six other major currencies, trades higher around 104.20 at the time of writing. The steady labor growth in August and the recovery in US Treasury yields helped the buck to maintain its strength.
Furthermore, the buck could experience upward support as investors are still pricing in the odds of a 25 basis points (bps) rate hike by the US Federal Reserve (Fed). Additionally, Federal Reserve Bank of Cleveland President Loretta J. Mester supported the Fed’s hawkish stance and dismissed the possibility of a bias toward rate cuts in a speech on Friday. Market participants await the US Factory Orders (Jul) to gain clear directions.