Forex

AUD Holds Firm as China's Manufacturing Sector Contracts

Guavy AI Editorial Team Published July 31, 2026

Instruments

USD AUD

The Australian Dollar (AUD) held firm against the US Dollar (USD) on Friday, despite China's manufacturing sector slipping back into contraction in July. The NBS Manufacturing Purchasing Managers Index (PMI) fell to 49.2 from 50.3 previously, missing market expectations of 50.

The weakness in the US Dollar remains a supportive factor for the AUD, but the latest Chinese economic data is limiting its upside potential. The Non-Manufacturing PMI also declined to 49, below forecasts.

Australia's monetary policy outlook has shifted in recent days, with markets reassessing their expectations after the Reserve Bank of Australia (RBA) released its second-quarter inflation data. Analysts at Deutsche Bank highlight that the latest Australia inflation print came in softer than expected, with 'Australia's consumer price index (CPI) rose +0.6% qoq in Q2 (vs. +0.7% expected and +1.4% in Q1), supported by easing fuel prices.'

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