AUD/USD Hovers Near the 0.6800 Mark on the First Trading Day of 2024

AUD/USD fell during early Asian trading on Tuesday, the first trading day of 2024. Markets remained calm during the first trading week of the year. AUD/USD is currently trading around 0.6808, down 0.04% on the day.

On Tuesday, the final value of Australia’s Judo Bank’s manufacturing purchasing managers index for December 2023 was 47.6, lower than the expected value of 47.7. The manufacturing output index fell back to a historically low level of 45.5 in December. The report shows that Australia’s manufacturing industry has shown a continued easing trend throughout 2023, responding to monetary policy, with inflation consistent with the Reserve Bank of Australia’s target level. Manufacturing is gradually slowing down, a trend we estimate will continue into early 2024.

In the U.S. dollar, the Chicago Purchasing Managers’ Index fell to 46.9 in December from 55.8 in November, below expectations of 51.0. At the Federal Reserve (Fed) meeting in December 2023, the Federal Reserve made dovish remarks, and investors have priced in three interest rate cuts by the Federal Reserve in 2024. Bloomberg’s World Interest Rate Implied Probability (WIRP) shows the market is pricing in a 15% chance of a rate cut on January 31 and a 15% chance of a March 20 rate cut. This has therefore put some selling pressure on the US dollar (USD), becoming a “tailwind” for the AUD/USD currency pair.

Looking ahead, the U.S. S&P Global Manufacturing Purchasing Managers’ Index for December will be released on Tuesday. The Federal Reserve will be closely watched on Wednesday. Fed Chairman Barkin will speak on Wednesday and Friday, while Logan will speak on Saturday.

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