AUD/USD holds above 0.6600, eyes on Chinese PMI, Core US PCE data

• AUD/USD loses ground near 0.6620 on the modest recovery of USD.
• US economy expanded at an annualized rate of 5.2% vs 4.9% prior, better than expected.
• Australian monthly CPI eased 4.9% YoY from 5.6% in the previous reading.
• Chinese PMI and US Core Personal Consumption Expenditure Price Index (PCE) will be the highlight on Thursday.

The AUD/USD pair loses traction to 0.6620 after retracing from its highest level in almost four months. The downtick of the pair is backed by the recovery of the US Dollar (USD) on diverging Federal Reserve (Fed) official comments on future rate hikes.

The US economic US data have lifted the USD modestly from monthly lows. However, the upside remains capped in the near term as the market is pricing a 25 basis points (bps) rate cut in May 2024 and seems to have abandoned any notion of rates being higher for longer. On Wednesday, the US economy expanded at an annualized rate of 5.2% during the third quarter from the previous reading of 4.9%, above the market consensus of 5.0.

On the Aussie front, the Australian monthly CPI slowed in October, easing from 5.6% to 4.9% YoY. The Reserve Bank of Australia (RBA) Governor Michele Bullock said that current monetary policy is restrictive, with higher rates dampening demand, especially in the context of persistent services inflation.

Market players will keep an eye on China’s PMI data and Australia's Private Credit data on Thursday. That being said, the stronger-than-expected Chinese data could boost the Australian Dollar (AUD) as China is its largest trading partner. Also, the US will release the key figures, including the weekly Jobless Claims, the Core Personal Consumption Expenditure Price Index (PCE) for October, the Chicago PMI, and Pending Home Sales.