AUD/USD remains below 0.6400 after Aussie downbeat data, focus shift to RBA Lowe speech

• AUD/USD struggles around 0.6380 after Australia’s downbeat trade data.
• Upbeat US Treasury yields continue to support the US Dollar (USD).
• US-China trade tension exerts downward pressure on the AUD/USD pair.

AUD/USD hovers near 0.6380 during the Asian session on Thursday, trading near the Year-To-Date (YTD). The firmer US Dollar (USD) is contributing support to undermine the AUD/USD pair as market participants anticipate the Federal Reserve (Fed) to maintain interest rates at a higher level for an extended period. Additionally, Australia’s downbeat Trade Balance (MoM) for July is reduced to 8,039M against the 10,000M expected. The balance was reported at 11,321M in the previous month.

The Australian Dollar (AUD) experienced minor support due to Australia’s upbeat Gross Domestic Product (GDP) for the second quarter released on Wednesday. GDP (YoY) grew at 2.1%, better than expectations of 1.7%. The growth rate was 2.4% in the previous quarter. GDP (QoQ) growth remained consistent at 0.4%, against the market consensus of 0.3%.

However, the Australian Treasurer, Jim Chalmers stated, "The slowdown in China's economy and higher interest rates at home will put significant pressure on the Australian economy." Chalmers also expressed confidence that Australia could steer clear of a recession.

The trade tensions between the US and China escalated, which could act as headwinds for the AUD/USD pair. The US Commerce Secretary Gina Raimondo’s statement as per Reuters. Raimondo expects no revisions to the US tariffs on China, which were imposed during Trump's administration until the ongoing review by the US Treasury Office is completed.

Conversely, US ISM Services PMI improved to a six-month high reading of 54.5 in August against the expectations of 52.5 and 52.7 prior. Further, the S&P Global Composite and Services PMIs eased to 50.2 and 50.5 versus the market consensus of 50.4 and 51.0. It is worth noting that moderate US data provided support in underpinning the Greenback.

Additionally, the investors are pricing in the possibility of a 25 basis points (bps) interest rate hike through the end of the year 2023. This hawkish sentiment continues to support the US Treasury yields, bolstering the confidence of US Dollar (USD) bulls. The 10-year US bond yield rose to 4.29%, up by 0.23%. US Dollar Index (DXY) hovers around 104.90, which measures the value of the Greenback against the six other major currencies.

Investors await China’s trade data for August ahead of the Reserve Bank of Australia (RBA) Governor Philip Lowe’s speech for guidance on the market. However, the prevailing risk-averse sentiment and the strength of the US Dollar pose significant challenges for AUD/USD bulls.