The Australian Dollar (AUD) started the week with continued losses, marking its second successive session of decline as it traded lower around 0.6560 during the Asian session on Monday. The downward trend can be attributed to the strengthening of the US Dollar (USD), buoyed by higher US Treasury yields, putting pressure on the AUD/USD pair.
At the time of writing, the US Dollar Index (DXY) hovers around 104.40, bolstered by an unexpected positive outcome from the Nonfarm Payrolls (NFP) report. The robust performance of the labor market in March, surpassing expectations, reinforces a bullish sentiment towards the US Dollar.
Despite the encouraging economic indicators in the US, market sentiment still leans towards a potential rate cut by the Federal Reserve (Fed) in June. Speculations suggest a high likelihood of a rate cut, with around a 70% probability, followed by an estimated total easing of approximately 75 basis points (bps) throughout 2024.
According to the US Bureau of Labor Statistics (BLS), March witnessed a significant increase of 303,000 jobs, exceeding the anticipated 200,000. However, February’s NFP growth was revised downward from 275,000 to 270,000. Meanwhile, US Average Hourly Earnings in March rose by 0.3% month-over-month, meeting expectations, albeit slightly lower than the previous reading of 0.2%. On a yearly basis, there was a 4.1% increase, aligning with market consensus but slightly lower than the previous 4.3%.
Market observers are closely monitoring the upward trend in copper and oil prices, which could potentially lend support to the Australian Dollar (AUD). Nonetheless, challenges arose for the AUD following unchanged Final Retail Sales and downbeat Trade Balance data released from Australia on Friday.
Australia recorded its smallest Trade Surplus in five months in February, primarily due to a decrease in iron ore exports. In March, the Reserve Bank of Australia (RBA) maintained its cash rate at a 12-year high of 4.35% for the third consecutive meeting. However, the omission of a previous warning by the RBA regarding the possibility of further rate hikes adds to the uncertainties surrounding the AUD’s outlook.
