The AUD/USD pair trades around 0.6700, up 0.10%, after the release of the US PMI data. The Australian Dollar, showing resilience, is affected by Chinese economic data as China is a main trading partner for Australia.
China’s Services PMI slightly slipped to 52.0 in December, while the Manufacturing PMI rose to 50.1, indicating marginal expansion. Expectations of monetary tightening support the Aussie, with attention on Australia’s upcoming CPI report due on January 28.
The Impact Of US Geopolitical And Economic Developments
In the US, the Dollar initially gained from safe-haven demand amid geopolitical tensions involving Venezuela. However, this reversed after the ISM Manufacturing PMI fell to 47.9, signalling faster contraction in the US manufacturing sector.
Markets anticipate two more Fed rate cuts in 2026, with interest on Trump’s potential Fed Chair nomination. Minutes from the Fed’s December meeting revealed a pause in further rate cuts if inflation eases.
The heat map displays percentage changes among major currencies. The Australian Dollar was strongest against the Canadian Dollar, with a 0.36% increase. The base and quote currencies in the map guide the percentage changes displayed.
We are seeing the AUD/USD hold steady around the 0.6700 mark, showing strength even with mixed news from China. The US Dollar is softening after the latest manufacturing data pointed to a faster contraction in that sector. This contrast between a resilient Aussie and a weakening Greenback is creating an opportunity.
The Influence Of Future Economic Indicators
The main event we are watching is Australia’s inflation data on January 28, which could be a major catalyst. Looking back at 2025, we saw the Reserve Bank of Australia struggle to bring inflation down from the cycle peaks experienced in previous years. If the upcoming CPI number is higher than expected, it could push the RBA to raise its 4.35% cash rate at the February 3 meeting, which would be very bullish for the Aussie.
On the other side of the trade, the US economy is showing clear signs of cooling, and markets are anticipating two more interest rate cuts from the Federal Reserve this year. The US ISM Manufacturing PMI has now been in contraction territory, below 50, for 14 consecutive months, a trend that reinforces the view that the Fed’s next moves will be to ease policy. This growing divergence between a potentially hawkish RBA and a dovish Fed supports a higher AUD/USD exchange rate.
For traders, this suggests that buying call options on the AUD/USD with a February expiration date could be a good strategy. This allows us to profit from a potential upward move driven by the Australian CPI data and RBA meeting. The options provide a defined risk, protecting us if the data surprises to the downside.
However, we must watch for any negative news out of China, as Australia’s economy is closely tied to it. We saw how China’s uneven recovery in 2025, which included a record youth unemployment rate of over 21%, created headwinds for global growth. A sudden slowdown there could easily weaken the Australian dollar, regardless of the RBA’s actions.
