Turning focus to the AUD/USD pair, the S&P Global Services PMI dropped from 55.8 in August to 52.4 in September, up from a preliminary 52.0.
Slower services sector activity could weigh on the Aussie economy, given that the sector contributes between 60% and 70% to the GDP.
Notably, employment and price trends diverged, further complicating the RBA’s monetary policy outlook. While job growth accelerated to a five-month high, inflation cooled.
Jingyi Pan, Economics Associate Director at S&P Global Market Intelligence, commented on the September survey, stating:
“On the price front, the easing of service sector output price inflation is a welcome development in supporting demand and in providing some room for monetary policy to further loosen before the end of the year.”
AUD/USD: Key Scenarios to Watch
Bearish AUD/USD Scenario: Dovish RBA chatter and rising trade tensions may drag AUD/USD toward the 50-day EMA and $0.655.
Bullish AUD/USD Scenario: Hawkish RBA comments and easing trade friction could drive AUD/USD toward $0.665.
Amid lingering uncertainty about the timeline for an RBA rate cut, US services sector data could influence the number of Fed rate cuts in the fourth quarter.
A higher PMI, combined with rising prices and employment, could reduce bets on Fed rate cuts. A more hawkish Fed policy stance would widen the interest rate differential, favoring the US dollar. A wider rate differential may push AUD/USD toward the 50-day EMA and $0.655.
On the other hand, a lower PMI, falling prices, and job cuts could support multiple Fed rate cuts in the fourth quarter. A narrowing interest rate differential, favoring the Aussie dollar, could send AUD/USD toward $0.665.
