• Australian Dollar consolidates after the release of improved PMI figures.
• Australian Manufacturing and Services PMI increased to 50.3 and 47.9, respectively.
• The upbeat Australian share market provides support for the AUD.
• US Dollar demand persists on risk aversion sentiment as escalated geopolitical tension. 
• US forces carried out strikes on Iran-backed Kataib Hezbollah militia group in Iraq.

The Australian Dollar (AUD) attempts to move on an upward trajectory on Wednesday on the back of the improved preliminary Purchasing Managers Index (PMI) from Australia, released on a monthly basis by Judo Bank and S&P Global on Wednesday. However, the US Dollar (USD) maintains stability, holding its positive position from the previous session, despite a decrease in the 2-year United States (US) bond yield.

Australia's PMI data revealed a positive shift in business activity in January across all sectors. The Manufacturing PMI increased from 47.6 to 50.3, showcasing improvement. Services PMI also saw an uptick, rising from 47.1 to 47.9. The Composite PMI registered an increase, reaching 48.1 compared to December's 46.9. Furthermore, Australian shares continued their upward trajectory, setting a third consecutive record high. The surge was attributed to increased performance in Miners and energy stocks, serving as a favorable factor for the AUD/USD pair.

The US Dollar Index (DXY) remains stable after its recent upswing, as buying interest in the US Dollar persists due to risk aversion sentiment. This trend is likely associated with the escalated geopolitical tensions in the Middle East. The US Secretary of Defense issued a statement confirming that "US military forces carried out essential and proportional strikes on three facilities utilized by the Iranian-backed Kataib Hezbollah militia group and other Iran-affiliated groups in Iraq." These actions were a direct response to a sequence of escalating attacks.

Traders are likely anticipating the release of the S&P Global Purchasing Managers Index data from the United States on Wednesday. This data is expected to provide crucial insights into business activities within the nation, influencing market sentiments about the Federal Reserve’s (Fed) interest rate trajectory.

Money market futures have reduced the likelihood of a rate cut by the Fed in March. However, by May, there is full pricing in of a 25 basis point (bps) cut, and the probability of a more substantial 50 bps cut stands at 50%