AUD/USD clings to gains above 0.7200 mark amid weaker USD/upbeat market mood

• A combination of supporting factors assisted AUD/USD to regain positive traction on Monday.
• The risk-on impulse undermined the safe-haven USD and benefitted the perceived riskier aussie.
• Upbeat Australian PMI prints provided an additional boost and remained supportive of the move.

The AUD/USD pair maintained its strong bid tone through the early European session and was last seen trading near the daily high, around the 0.7215 region.

Investors turned optimistic on the first day of a new week after US President Joe Biden and his Russian counterpart Vladimir Putin agreed in principle to hold a summit on the Ukraine crisis. This, in turn, provided a goodish lift to the global risk sentiment, which prompted fresh selling around the safe-haven US dollar and benefitted the perceived riskier aussie.

Adding to this, upbeat Australian PMI prints provided an additional boost to the domestic currency and remained supportive of the AUD/USD pair intraday move up. In fact, the IHS Markit Flash Manufacturing PMI pointed to a further expansion in February and rose to 57.6 from the 55.1 previous. Moreover, the gauge for the services sector jumped to 56.4 – an eight-month high.

The data further boosted market bets for an interest rate hike by the Reserve Bank of Australia (RBA). On the other hand, uncertainty about the Fed's tightening plans further weighed on the buck and extended additional support to the AUD/USD pair. It is worth recalling that the January FOMC meeting minutes failed to reinforce expectations for a 50 bps rate hike in March.

Moreover, the latest geopolitical developments might force the Fed to adopt a less aggressive policy stance to combat high inflation. This, along with the recent pullback in the US Treasury bond yields, kept the USD bulls on the defensive. That said, the market fears about an imminent Russian invasion of Ukraine could lend some support to the USD and cap the AUD/USD pair.

US-based satellite imagery company Maxar reported multiple new deployments of Russian military units near the border with Ukraine. Adding to this, Russia extended military drills in Belarus that were due to end on Sunday. the focus will be on the upcoming meeting between the US Secretary of State Antony Blinken and Russian Foreign Minister Sergei Lavrov planned for February 24.

In the meantime, the broader market risk sentiment will drive the USD demand and provide some impetus to the AUD/USD pair amid absent relevant market moving economic releases. The US banks are closed on Monday in observance of Presidents' Day, which might hold back traders from placing aggressive bullish bets and keep a lid on any meaningful upside for the AUD/USD pair.

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