Private Sector PMIs Bolster Q1 2025 RBA Rate Cut Expectations
On Thursday, Australian service sector PMI numbers drew investor interest, influencing the AUD/USD pair. The Services PMI carried more weight as it accounts for almost 80% of GDP and remained the main contributor to underlying inflation.
The Judo Bank Services PMI increased from 50.5 in September to 50.6 in October. Beyond the Services PMI, price and employment trends could influence the RBA rate path. According to the October survey, input and output price pressures softened in October, while firms hired at the fastest rate five-months.
The upswing in hiring aligned with RBA Deputy Governor Hauser’s comments about tight labor market conditions.
Tighter labor market conditions may boost wage growth and consumer spending, potentially fueling demand-driven inflation. The RBA could maintain the cash rate at 4.35% for longer to dampen private consumption and inflation. Nevertheless, softer prices could dampen the effects of a tighter labor market on the RBA rate path.
Australian Dollar Daily Chart
Later in the session, the US labor market data and services PMI figures will influence the AUD/USD pair. A drop in initial jobless claims and a higher S&P Global Services PMI may pull the AUD/USD below $0.66. Conversely, higher jobless claims and a softer S&P Services PMI could signal a more dovish Fed rate path, potentially driving the AUD/USD toward $0.67.
