AUD/USD holds steady below 0.6500 amid mixed market signals

• AUD/USD hovers near week's low, with US inflation data briefly lifting the Aussie before a USD rebound.
• US Core PCE aligns with forecasts; unemployment claims rise, fueling speculation on June rate cut.
• Australian manufacturing PMI contraction raises concerns over post-pandemic economic recovery.

The AUD/USD registered back-to-back trading sessions with losses and remained within the lows of the week, just below the 0.6500 figure. US Inflation data initially boosted the Aussie, though the rally was short-lived, as the Greenback staged a comeback. The pair exchanges hands at 0.6490, virtually unchanged.

AUD/USD unchanged as US inflation data and Aussie PMI slowdown weighed on the AUD

Wall Street closed with gains, depicting an upbeat market sentiment. The Core Personal Consumption Expenditure (PCE) Price Index, the Federal Reserve’s preferred gauge for inflation, was aligned with estimates of 2.8% YoY, down from December 2.9%. The headline PCE continued its downward trend and rose by 2.4% YoY, down from 2.6% in the previous month.

Other data showed the Department of Labor announced unemployment claims for the week ending on February 17 jumped 215K above the consensus of 210K and the previous reading of 202K.

Following the data, Fed interest rates probabilities witnessed an increase in the odds of a 25 bps rate cut in the June meeting. A day ago, odds were at around 50%, and currently sit at 60.4%.

Recently, the Australia Judo Bank Manufacturing PMI for February came at 47.8, indicating that the business economy contracted, down from January’s 50.1 expansion. Warren Hogan, Chief Economist Advisor at Judo Bank, said “Australia's manufacturing sector is not growing, bringing into question the idea of a post-pandemic manufacturing revival. Over the past year, soft outcomes most likely reflect capacity constraints in Australia's construction sector (a major driver of domestic manufacturing) and the broader cyclical slowdown in the economy.”

What to watch?

Friday’s US economic docket will feature the release of the ISM Manufacturing PMI, the Consumer Sentiment of the University of Michigan, and Fed speakers.