AUD/USD trades flat as US data diverges, Australian Q3 GDP in focus

• AUD/USD trades without clear direction around 0.6550 at the start of the week.
• US manufacturing indicators send conflicting signals about the strength of the economy.
• Markets remain focused on expectations of a Fed rate cut next week and on Australia’s Q3 GDP figures.

AUD/USD trades around 0.6550 on Monday at the time of writing, virtually unchanged on the day, as the market digests a batch of mixed US data and awaits key Australian releases. The pair remains confined in a phase of indecision, reflecting the relative weakness of both the Australian Dollar (AUD) and the US Dollar (USD).

Pressure on the Greenback remains in the background, with investors continuing to price in a Federal Reserve (Fed) rate cut at its December meeting. The chance of a 25-basis-point easing move stands above 80%, reinforcing the view that US monetary policy is shifting toward a loosening cycle. This expectation, however, is being shaped by Monday’s contradictory macroeconomic signals out of the United States (US).

The Institute for Supply Management (ISM) reported a sharper deterioration in US manufacturing conditions. The ISM Manufacturing Purchasing Managers Index (PMI) fell to 48.2 in November from 48.7 in October, undershooting the 48.6 forecast. Digging into the details, the New Orders Index dropped to 47.4, marking a third consecutive month of contraction, while the Employment Index declined to 44, pointing to weakening labour-market momentum. The only firmer component was the Prices Paid Index, which rose to 58.5, signalling ongoing cost pressures.

In contrast, the S&P Global US Manufacturing PMI painted a more constructive picture, rising to 52.2 from 51.9 and marking a fourth straight month of expansion. The survey highlighted a solid rise in production and another increase in employment, although demand growth slowed and export orders declined for the fifth consecutive month. The divergence between the two surveys keeps uncertainty high regarding the true state of the US manufacturing sector.

On the Australian side, the Aussie remains under pressure following a disappointing Chinese Manufacturing PMI, which slipped to 49.9 in November. As China is Australia’s largest trading partner, any contraction in Chinese manufacturing activity tends to weigh directly on the Australian Dollar.

Investors are now looking ahead to the release of Australia’s Q3 Gross Domestic Product (GDP) on Wednesday, with markets expecting a slightly faster pace of growth compared with the previous quarter, a potential source of support for the AUD if the data surprises to the upside.