**AUD/USD Holds Above 0.6600, Eyes US PCE Data For Direction**
*Based on the article by Haresh Menghani for FXStreet (original: fxstreet.com/news/aud-usd-holds-steady-above-06600-remains-close-to-two-month-high-ahead-of-us-pce-data-202512050055), with additional insights provided.*
—
**Overview**
The AUD/USD currency pair trades steadily above 0.6600 as it hovers near a two-month high. Attention in the market is focused on the impending US Personal Consumption Expenditures (PCE) Price Index data, which is expected to offer further guidance on the Federal Reserve’s approach to interest rates in the coming months. The Australian dollar benefits from a nuanced risk environment, a relatively stable Chinese economic backdrop, and fluctuating expectations surrounding US inflation and growth.
—
**Key Developments Supporting AUD/USD**
– The AUD/USD pair has demonstrated resilience, maintaining levels above the crucial 0.6600 psychological barrier as of early May.
– Recent upward movement has placed the pair near its best point since mid-March, reflecting renewed positive sentiment toward the Australian dollar.
– Risk appetite, underpinned by moderate optimism in global equity markets and continued signs of stabilization in China’s economic performance, has bolstered the AUD, as Australia maintains strong trade ties with China.
—
**Global & Domestic Catalysts**
1. **China’s Economic Conditions**
– As Australia’s largest trading partner, Chinese corporate activity impacts the Australian dollar. Recent data from China, such as improved manufacturing and steady expansion in the services sector, has offered a more supportive environment for the AUD.
– For instance, the Caixin Manufacturing PMI for April remained in expansion territory, reinforcing the idea that demand for Australian minerals and goods could improve throughout 2024.
2. **Australia’s Domestic Data**
– Australian economic indicators have been mixed. April’s jobs data showed an increase in employment, which highlighted ongoing strength in the labor market.
– However, inflation remains a concern. While still above the Reserve Bank of Australia’s (RBA) 2 percent to 3 percent target, price pressures have cooled slightly, tempering expectations of further rate hikes.
– The RBA left rates steady at 4.35 percent during the last meeting but warned of inflation risks that could prompt a further move if price growth does not slow sufficiently.
3. **US Dollar Dynamics**
– The broader US dollar index (DXY) has faced pressure recently as Treasury yields stabilize after their earlier climb.
– Mixed US economic indicators have contributed to this, with some reports pointing toward economic cooling. However, others, such as the recent nonfarm payrolls and services sector data, have been robust.
– Market participants await fresh cues from the US PCE Price Index, the Fed’s favorite inflation metric.
—
**Focus On US PCE Price Index**
The US PCE Price Index is a critical inflation reading
Read more on AUD/USD trading.