Market Trading Is Thin, AUD/USD Rises Above 0.6520

AUD/USD opened higher on Monday near 0.6525. Australia has a holiday on Easter Monday and markets are likely to be thin. Investors will be keeping a close eye on the U.S. ISM Manufacturing Purchasing Managers’ Index (PMI) for fresh impetus, which is expected to rise to 48.4 in March from 47.8 in February.

U.S. inflation, measured by the personal consumption expenditures price index (PCE), rose in line with expectations in February, rising at an annual rate of 2.5%. The monthly rate was slightly lower than market expectations, with the PCE price index rising by 0.4% on a monthly basis in February. Elsewhere, the core PCE price index, which excludes volatile food and energy prices, rose 2.8% on the year and 0.3% on the month, in line with expectations. The data suggests inflationary trends are continuing and could keep the Federal Reserve on hold before cutting interest rates this year. Suggestions that U.S. interest rates will remain higher for longer may provide some support for the U.S. dollar (USD) in the short term.

Federal Reserve Chairman Jerome Powell said on Friday that recent U.S. inflation data were “consistent with what we wanted to see,” keeping the Fed’s base case for rate cuts this year unchanged. Fed officials continue to expect three interest rate cuts this year. Investors expect rate cuts to begin at the June meeting.

For the Australian dollar, strong China Purchasing Managers Index (PMI) data may limit the downside for the Australian dollar (AUD), which acts as a proxy for China. The China Federation of Logistics and Purchasing (CFLP) released a report on Sunday saying that the National Bureau of Statistics’ manufacturing purchasing managers’ index rose to 50.8 in March from 49.1 in the previous month. Meanwhile, the National Bureau of Statistics’ non-manufacturing purchasing managers’ index rose to 53.0 in March from 51.4 in February.

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