AUD/USD Rebounds Strongly from 0.6500 on US Dollar Weakness

• AUD/USD recovers vertically from 0.6490 as the US Dollar weakens.
• Market participants expect the Fed to announce a rate cut in June.
• Upbeat Caixin Manufacturing PMI enhances Australian Dollar attractiveness.

AUD/USD recovers in a V shape from 0.6490 as investors expect the Federal Reserve (Fed) to start reducing interest rates from the June policy meeting. Australian asset recovers strongly while US dollar comes under pressure.

The global market is seeing mixed action as S&P 500 futures decline in the European session while risk currencies perform better against the US dollar. The Dollar Index, which measures the value of the Dollar against six rival currencies, fell slightly to 104.00.

Markets remain firm on expectations of rate cuts by the Fed at the June meeting, as annual core inflation data grew at the slowest pace in years, 2.8%. However, the Federal Reserve (Fed) is still not willing to relax the restrictive policy sooner, as it needs more confidence that inflation will return to the 2% target.

Fed policymakers want to analyze more data to confirm whether January's high inflation figure was a one-time blip or whether price pressures are rising again.

Looking ahead, market participants will be keeping an eye on February US Manufacturing PMI data, due at 15:00 GMT.

For its part, the Australian dollar moves strongly after the publication of the Caixin manufacturing PMI for February. Surprisingly, the economic data rose to 50.9 compared to expectations of 50.6 and the previous reading of 50.8. The Australian economy is China's main trading partner, and an improvement in the latter country's economic prospects ends up strengthening the attractiveness of the Australian dollar.