Aussie rally continues as services PMI rises

The Australian dollar continues to power ahead and has posted strong gains for a third straight day. In the North American session, AUD/USD is trading at 0.6614, up 0.75%.

Australian Services PMI shows faster expansion

The driver behind the Aussie’s sharp gains today was the Services PMI report, which improved to 54.4 in March. This was up from 53.1 in February and marked the fastest rate of expansion since April 2022. The report also noted that confidence in the services sector has increased. Business activity has been the engine driving the economy, as the manufacturing sector continues to sputter.

The Reserve Bank of Australia has maintained rates at 4.35% for five consecutive months, but the “higher for longer” stance may be over. The minutes of the March meeting, released this week, indicated that the RBA did not consider the option of hiking rates. That is the first time that rate hikes were not considered at an RBA policy meeting since the central bank started its rate-tightening cycle in May 2022.

The RBA still hasn’t jumped on the rate-cut bandwagon, but the minutes were dovish and the central bank is expected to begin lowering rates late in the year. It’s unclear when exactly the central bank will shift policy and start cutting rates, but the message from the RBA meeting appears to be that the rate-tightening cycle is over.

In the US, unemployment claims were higher than expected, at 221,000 last week. This was higher than the previous reading, which was revised to 212,000 and beat the market estimate of 214,000. All eyes are now on the nonfarm payrolls report, which will be published on Friday. The market estimate stands at 200,000 for March, compared to 275,000 a month earlier. An unexpected reading could result in volatility for AUD/USD.

AUD/USD Technical

• AUD/USD has pushed past resistance at 0.6593 and is putting pressure on resistance at 0.6628
• 0.6554 and 0.6519 are providing support

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