AUD/USD hovers around 0.6700 ahead of the Australian Mid-Year Economic and Fiscal Outlook

• AUD/USD holds positive ground near 0.6700, down 0.03% on the day.
• The preliminary US S&P Composite PMI for December arrived at 51.0 vs. 50.7 prior, the fastest pace since July.
• The Chinese economy showed indications of moderate growth in November, with factory output and retail sales growing.
• Investors await Australia’s mid-year Economic and Fiscal Outlook on Monday.

The AUD/USD pair hovers around the 0.6700 mark, its highest since July during the early Asian session on Monday. The anticipation of rate cuts by Federal Reserve (Fed) officials weighs on the US Dollar (USD) broadly and lends some support to the AUD/USD pair.

On Friday, Atlanta Fed President Raphael Bostic said the central bank can begin cutting the interest rate sometime in the third quarter of 2024 if inflation falls as expected. Additionally, Chicago Fed President Austan Goolsbee added that he did not rule out the odds of a rate cut at the Fed’s meeting next March.

US business activity expanded at the fastest pace since July, according to US S&P Global Purchasing Managers’ Index (PMI) data on Friday. The preliminary Composite PMI for December came in at 51.0 from 50.7 in November. The Manufacturing PMI dropped to 48.2 from 49.4, while the Services PMI climbed to 51.3 from 50.8.

The Chinese economy showed indications of moderate growth in November, with factory output and retail sales growing, according to the National Bureau of Statistics of China on Friday. However, the property market remained weak despite the government’s promise of more policy support. The market expects additional stimulus measures to be rolled out to prop up demand in the property sector, along with lending rate cuts in the first half of 2024. Any positive development surrounding the Chinese economy might lift the China-proxy Australian Dollar (AUD) as China is Australia’s largest trading partner.

Investors will focus on Australia’s Mid-Year Economic and Fiscal Outlook on Monday. Later this week, the Reserve Bank of Australia (RBA) will release the minutes of its latest meeting on Tuesday as well as the US housing data, including Building Permits and Housing Starts. The highlight this week will be the Core Personal Consumption Expenditure Price Index (PCE) report, due on Friday.