The AUD/USD pair bounces back strongly after posting a fresh eight-month low near 0.6350 in Monday’s European session. The Aussie asset recovers as the US Dollar (USD) tumbles to a fresh four-month low but still remains negative due to weak Australian Dollar (AUD).

Escalating Middle East tensions and risks of the United States (US) economic slowdown have prompted risk-aversion in global markets. This has dampened the appeal of risk-sensitive assets. Fears of a US slowdown stemmed from cooling labor market conditions and a sharp contraction in activities in the manufacturing sector.

The Aussie is under severe pressure due to dismal market sentiment. S&P 500 futures have faced a bloodbath in European trading hours, exhibiting a sharp decline in investors’ risk appetite. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, slides sharply to near 102.60.

Meanwhile, the next trigger for the Australian Dollar will be the Reserve Bank of Australia’s (RBA) interest-rate decision, which will be announced on Tuesday. The RBA is expected to leave its key Official Cash Rate (OCR) unchanged at 4.35%. Therefore, investors will majorly focus on the interest rate guidance.

In Monday’s session, investors will focus on the US ISM Services PMI for July, which will be published at 14:00 GMT. The PMI report is expected to show that activities in the services sector expanded to 51.0 after contracting to 48.8. Investors will also focus on other Services PMI indexes, such as Prices Paid and New Orders, which indicate changes in input prices and forward demand, respectively.

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