The Australian dollar’s recovery was capped at 0.6740 on Tuesday, and the pair retreated during the European session to trade at 0.6715 at the time of writing, practically flat on the daily chart.
The Australian dollar gives up Tuesday’s gains as the US dollar rises after Monday’s reversal. Investors are hesitant to take directional bets on the US dollar ahead of a series of key US unemployment numbers due later this week, which may help clarify the US Federal Reserve’s near-term path.
US data released on Monday showed that manufacturing activity contracted at the fastest pace in the past 14 months, as measured by the ISM Services Purchasing Managers’ Index, sending the US dollar lower across the board.
US data reinforces dovish views at the Fed
The ISM Manufacturing PMI for December fell to 47.9, from 48.2 in November, versus market expectations of a slight improvement to 48.3. New orders remained within contractionary numbers while prices continued to grow at a steady pace, painting a bleak picture for the outlook for factory activity in the United States.
Furthermore, comments from Minneapolis Fed President Neel Kashkari leaned on the dovish side, warning of the risks of higher unemployment rates. The comments were taken as a signal that the Fed may have to cut interest rates more than once this year. Not the most supportive message for the US dollar in this context.
In Australia, hot consumer inflation numbers seen in December reinforced market expectations that the Reserve Bank of Australia could be the first major central bank to raise interest rates after the latest global easing cycle. In this context, the Australian S&P Global Services PMI on Tuesday, and the monthly CPI, due on Wednesday, will be watched with particular attention to confirm those views.
Economic indicator
Global Services Purchasing Managers’ Index (S&P).
The Services Purchasing Managers’ Index (PMI) is released on a monthly basis by Standard & Poor’s Globalis a leading index that measures business activity in the Australian services sector. Data are drawn from surveys of senior executives in private sector companies from the service sector. Survey answers reflect the change, if any, in the current month compared to the previous month and can anticipate changing trends in official data series such as GDP, employment and inflation. A reading above 50 indicates that the services economy is generally expanding, which is a bullish signal for the Australian Dollar (AUD). Meanwhile, a reading below 50 indicates that activity among providers is generally declining, which is bearish for the Australian dollar.
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Next release:
Tuesday 06 January 2026 at 22:00
repetition:
monthly
consensus:
–
former:
51
source:
Standard & Poor’s Global
