AUD/USD comes under pressure as US Dollar gains ground ahead of US economic data

• AUD/USD edges down as the US Dollar exhibits stability ahead of US economic data.
• Upbeat Caixin PMI data has improved the global demand outlook.
• The Australian economy grew at a slower pace of 0.1% in the January-March period.

The AUD/USD pair exhibits a subdued performance near 0.6650 in Wednesday’s European session. The Aussie asset has come under pressure as the US Dollar (USD) gathers strength ahead of the United States (US) ISM Services PMI and the ADP Employment data for May, which will be published in the New York session.

The US economic data will significantly influence market speculation for the Federal Reserve (Fed) to begin reducing interest rates from the September meeting.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, rises to 104.30. Meanwhile, market sentiment shows an asset-specific action as US equity futures post decent gains in the London session while risk-perceived currencies appear on the backfoot.

Global equities also see a strong demand as upbeat China’s Caixin PMI Index for May has improved worldwide demand outlook. Caixin Services PMI at a faster pace to 54.0 from expectations of 52.6. This was the highest reading since July 2023. Also, Caixin Manufacturing PMI reached to two-year high at 51.7.

Being a proxy to China’s economy, the Australian Dollar strengthens on strong PMI data. However, it fails to capitalize due to weak domestic Q1 Gross Domestic Product (GDP) data. The Australian economy expanded at a slower pace of 0.1% from the estimates of 0.2% and the former release of 0.3%, upwardly revised from 0.2%.

This has pushed back expectations of the Reserve Bank of Australia (RBA) raising its Official Cash Rate (OCR) one more time this year.