AUD/USD bulls stay the course as US Dollar slides

• AUD/USD holds on positive grounds despite risk-off mood.
• The Australian economy expanded less than expected in the third quarter, eyes stay on data.

AUD/USD is higher on the day having climbed from a low of 0.6668 and reaching a high of 0.6734 so far. News that authorities have loosened some of the country's zero-COVID rules sparked a risk on mood in Asia that followed through into North American markets on Wednesday. The greenback has weakened amid concerns that rising interest rates could push the US economy into recession.

Investors have cheered the news that China is preparing its people to live with the disease, although there are still fears that the US central bank might stick to a longer rate-hike cycle which is weighing on US equities on Wednesday. 

At the start of this week, the Institute for Supply Management (ISM) said its Non-Manufacturing PMI rose to 56.5 last month from 54.4 in October, indicating that the services sector, which accounts for more than two-thirds of US economic activity, remained resilient in the face of rising interest rates.

The data beat forecast the Non-manufacturing PMI would fall to 53.1. While the data combined with last Friday's surprisingly strong Nonfarm Payrolls data in November had raised optimism that a recession could be avoided in 2023, investors are concerned that the Fed will subsequently hike rates by 75 Bps again at the December meeting.

Last Friday's surprisingly strong Nonfarm Payrolls data in November had also raised optimism that a recession could be avoided in 2023, yet investors are concerned that the Fed will subsequently hike rates by 75 Bps again at the December meeting which is a weight on high beta currencies such as the Aussie. More economic data, including weekly jobless claims, the Producer Price Index and the University of Michigan's Consumer Sentiment survey are due this week that will be watched for clues on what to expect from the Fed on Dec. 14.

Meanwhile, the Australian Dollar was facing some pressure overnight after data showed that the Australian economy expanded less than expected in the third quarter as persistent inflation and rising interest rates dampened consumption. The data follows the comments from the Reserve Bank of Australias Governor Philip Lowe who said that “the size and timing of future interest rate increases will continue to be determined by incoming data.”