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  • AUD/USD keeps gains in the wake of weak China Services PMI. 
  • Dips, if any, could be supported by the upbeat Aussie Q4 GDP released early Wednesday.

A private gauge of China’s services-sector activity released a few minutes before press time showed a slowdown in the pace of expansion in February. So far, however, the data has failed to elicit a reaction from the Aussie dollar, leaving AUD/USD bid at session highs near 0.7830. 

The Caixin China services purchasing managers index fell to 51.5 in February from 52 in January, Caixin Media Co. and research firm Markit said Wednesday. A decline to 51.5 was expected. Besides, the number stayed above the 50-mark, signaling expansion for the ninth straight month. 

That’s likely keeping the AUD from losing altitude. Also, the Aussie Q4 gross domestic product data released early today is supportive of a bullish move in AUD/USD. 

Australia’s economy expanded 3.1% quarter-on-quarter in the final three months of 2020, beating the estimated drop in the growth rate to 2.5% from the third quarter’s reading of 3.4%. In annualized terms, the economy contracted 1.1% versus -1.8% expected and -3.8% previous.

However, the currency pair may come under pressure if bond yields resume the recent rally, putting downward pressure on stock markets and other risk assets. 

Australia’s Treasurer Josh Frydenberg said early today that the global coronavirus stimulus is creating financial stability risk that will only intensify when interest rates inevitably rise. 

The Fed funds futures recently brought forward the first interest rate hike’s timing to December 2022 from 2024. However, last week Federal Reserve’s chairman Powell assured markets of continued monetary stimulus. The Reserve Bank of Australia also delivered a similar message on Tuesday. 

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