Australian Dollar Flattens Against USD In Countdown To US ADP Labor Data

• The Australian Dollar ranges vs. the US Dollar ahead of the US ADP Employment Change and ISM Services PMI data for July.

• Investors will closely monitor the US NFP data on Friday.

• The RBA is expected to leave policy rates steady next week.

The Australian Dollar (AUD) trades flat against the US Dollar (USD) at around 0.7050 during the European trading session on Wednesday. The Aussie pair struggles for a direction as investors await the United States (US) ADP Employment Change data for July, which will be published at 12:15 GMT.

At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades marginally lower at around 99.80.

The agency is expected to report fresh hiring of workers in the private sector at 70K, lower than 98K in June.

Investors will pay close attention to private employment as it will influence market expectations for the Federal Reserve’s (Fed) monetary policy outlook. The dependence of the Fed’s interest rate projections on the economic data has increased as the central bank has turned data-dependent and has stopped delivering so-called “forward guidance”.

In Wednesday’s session, investors will also focus on the ISM Services PMI data for July, which will be published at 14:00 GMT. The Services PMI is expected to arrive higher at 54.5 from 54.0 in June.

This week, the major trigger for the US Dollar will be the Nonfarm Payrolls (NFP) data for July, which is scheduled for Friday.

On the Aussie front, market expectations for the Reserve Bank of Australia’s (RBA) monetary policy decision on August 11 are expected to remain the key driver for the antipodean.

Aussie pressured as softer core inflation tempers RBA hike urgency

Analysts at Deutsche Bank highlight that the latest inflation data have eased pressure on the RBA to tighten further, noting that annual core inflation "edged up from +3.5% to +3.6%, but remained below the consensus estimate of +3.7%, reducing the urgency for additional interest rate hikes after the RBA already raised rates three times this year." They suggest that this softer-than-expected core print reinforces the market’s reassessment of the need for further near-term policy tightening, adding to the headwinds facing the Aussie.