AUD/USD has executed a dramatic V-shaped recovery from 0.6490, fueled by renewed expectations that the Federal Reserve (Fed) could initiate rate cuts as early as June. This bullish sentiment has pressured the US Dollar, though market action remains mixed, with S&P 500 futures down while riskier currencies gain ground.
The US Dollar Index, currently at 104.00, faces a slight pullback. Despite January’s core inflation data showing the slowest annual growth in years, the Fed remains hesitant to abandon its hawkish stance, requiring further evidence of sustained disinflation towards the 2% target before considering policy shifts. Friday’s US Manufacturing PMI data release at 15:00 GMT will be crucial in shaping near-term sentiment.
Meanwhile, the Australian Dollar benefits from surprisingly robust Chinese Caixin Manufacturing PMI figures for February, surpassing expectations with a reading of 50.9. As China is Australia’s primary trading partner, a strengthening Chinese economy positively impacts the Aussie Dollar.
