News Maker 23

The Australian dollar (AUD) continued to strengthen against the US dollar (USD) during the European trading session on Friday (August 21). The AUD/USD pair hovered around 0.7150, marking its highest level since early June and approaching the three-month peak near 0.7200. The Aussie's gains were driven by a combination of solid domestic economic data and persistent pressure on the US dollar following the US government's plan to increase Treasury bond buybacks.

Preliminary S&P Global Purchasing Managers’ Index (PMI) data for Australia indicated that business activity remains in an expansion phase. The manufacturing PMI held steady at 52.0, while the services sector saw a slight slowdown to 52.9 from 53.6 the previous month. Overall, Australia's composite PMI dipped slightly to 52.5 from 53.2 but remained above the 50-point mark, signaling continued economic growth.

Meanwhile, the US dollar remained under pressure after the US Treasury Department announced plans to increase buybacks of long-term government bonds starting in September. This policy move weighed on Treasury yields and prompted investors to question the sustainability of the dollar's strength amidst growing concerns regarding the US fiscal outlook.

Investors are now turning their attention to the US S&P Global PMI data. US business activity is expected to show continued expansion; the manufacturing PMI is projected to remain at 53.9, while the services PMI is forecast to slow to 54.0 from 54.6.

Newsmaker Analysis: AUD/USD fundamentals currently lean positive for the Australian dollar, supported by US dollar weakness and stable economic activity in Australia. As long as the DXY remains under pressure and Treasury yields do not surge again, the AUD/USD pair has the potential to test the 0.7200 level. However, the market must remain wary of a potential correction should US economic data come in stronger than expected or if the Federal Reserve signals a more hawkish policy stance. (arl)

Source: Newsmaker.id