AUD Rises On Minimum Wage Hike, China PMI

The Australian dollar (AUD) extended gains for a third day on Monday as Australia’s minimum wage rose 3.75%, in line with market expectations of 3.5% to 4.0%. The Federal Reserve’s preferred inflation indicator, US personal consumption expenditures (PCE) data, showed that price pressures eased in April. In addition, Australia’s monthly inflation rate also accelerated to 3.6%, increasing the possibility that the Reserve Bank of Australia (RBA) will need to raise interest rates again, boosting the Australian dollar.

The Australian dollar also benefited from China’s Caixin Manufacturing Purchasing Managers’ Index (PMI) for May, which was higher than expected. However, last Friday, China’s National Bureau of Statistics PMI data was lower than expected, curbing import demand in Australia, a major commodity producer. Given the close trade relationship between Australia and China, any changes in the Chinese economy will have a significant impact on the Australian market.

The US dollar continued to fall due to the depreciation of US Treasury yields. Federal Reserve (Fed) officials said last week that the central bank could achieve its annual inflation target of 2% without further interest rate hikes. Investors are expected to keep a close eye on Monday’s ISM manufacturing purchasing managers’ index and may shift their attention to Friday’s U.S. nonfarm payrolls report.

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