AUD/USD Drops After US NFP Report, RBA’s Hawkish Stance Could Limit Downside
- US Nonfarm Payrolls disappoint with 142K new jobs added, below the 160K estimate.
- RBA’s hawkish stance suggests no imminent rate cuts, which might support the AUD.
The AUD/USD declined by 0.85% in Friday’s session, now hovering near the 0.6700 level following the release of the US Nonfarm Payrolls (NFP) report for August. However, the hawkish stance of the Reserve Bank of Australia (RBA), suggests that no imminent rate cuts are likely, which might limit the downside to the Australian Dollar.
The economic prospects for Australia are uncertain, and the Reserve Bank of Australia’s aggressive stance to combat rising inflation has led to market expectations of only a 0.25% interest rate cut in 2024.
Daily Digest Market Movers: Australian Dollar Declines Against US Dollar After Mixed US Job Data
- US NFP report shows weaker-than-expected job growth, with 142K fresh payrolls against expectations of 160K.
- Unemployment Rate fell to 4.2% as anticipated, from the prior 4.3%.
- Likelihood of the Fed starting interest rate cuts this month remains steady, with a 45% chance of a 50 bps reduction to 4.75%-5.00%.
- RBA Governor Bullock’s hawkish stance reinforces the belief that interest rates will remain unchanged in the short term.
- Monetary policy divergences between the Fed and RBA suggest limited downside for the Aussie.
AUD/USD Technical Outlook: Bearish Momentum Tests Support at 0.6650
The pair has been in a downtrend since early September and is now testing the key support level of 0.6670. A break below this level could lead to further losses in the coming days.
The Relative Strength Index (RSI) is currently in the negative area and is sloping sharply downward, indicating that the bears are in control of the market. The Moving Average Convergence Divergence (MACD) is also bearish, confirming mounting selling pressure.
Central Banks FAQs
Central Banks have a crucial mandate of maintaining price stability in a country or region by adjusting their policy rates. The US Federal Reserve, European Central Bank, and Bank of England aim to keep inflation close to 2%.
By tweaking their benchmark policy rates, central banks can influence inflation levels. When rates are raised, it’s called monetary tightening, and when rates are lowered, it’s called monetary easing. Central banks strive to achieve a consensus among members, balancing between ‘doves’ who prefer loose policies and ‘hawks’ who advocate for tighter control on inflation.
Chairpersons lead policy meetings, aiming to communicate monetary policy without causing market instability. Members adhere to blackout periods before policy decisions to prevent premature disclosures.