AUD/USD drops below 0.6780 despite upbeat Caixin Manufacturing PMI

• AUD/USD has witnessed a sell-off despite better-than-projected Caixin Manufacturing PMI data.
• China’s Manufacturing PMI has landed at 49.0, higher than the consensus of 48.8.
• S&P500 futures have displayed a sell-off, portraying a risk-off market mood.

The AUD/USD pair is displaying a perpendicular fall and has dropped sharply to near 0.6773 despite the IHS Markit reporting better-than-anticipated Caixin Manufacturing PMI data. The economic data has landed at 49.0, higher than the consensus of 48.8 but lower than the prior release of 49.4.

The street was expecting a decline in the PMI numbers after observing negative cues from China’s official Manufacturing PMI data. Last week, China’s official Manufacturing PMI data dropped to 47.0 vs. the expectations of 49.2 and the former release of 48.0. It is worth noting that Australia is a leading trading partner of China and the extent of manufacturing activities in China impact the Australian Dollar.

In early Tokyo, the Australian Dollar didn’t react much to the S&P Global Manufacturing PMI data.  The economic data has dropped to 50.2 vs. the consensus and the prior release of 50.4.

Meanwhile, investors are getting risk-averse and surrendering longs in risk-perceived assets. S&P500 futures have witnessed a steep fall after a long weekend in the Asian session. The US Dollar Index (DXY) has displayed a rebound move after dropping to near 103.20. The USD Index is gaining traction as the street is expecting a higher interest rate peak by the Federal Reserve (Fed) to combat stubborn inflation in the United States economy.

There is no denying the fact that the headline Consumer Price Index (CPI) in the US economy has dropped after peaking around 9.1%. The labor market is still tight and attracting higher wages for maintaining the equilibrium, which could fetch the traction back into the inflation gamut. Analysts at TD Securities are of the view that the terminal rate will reach a range of 5.25-5.50% by the May Federal Open Market Committee (FOMC) meeting."