The AUD/USD currency pair traded slightly higher at 0.6735 on Friday, reversing a two-day losing streak during the European session. This rebound occurs as market participants adopt a cautious stance ahead of the US employment reports due later in the day.
Despite a weaker US Dollar and hawkish remarks from Reserve Bank of Australia (RBA) Governor Michele Bullock, the Australian Dollar (AUD) showed signs of weakening. In a statement on Thursday, Bullock indicated that “if the economy evolves broadly as anticipated, the board does not expect that it will be in a position to cut rates in the near term.”
Conversely, market expectations are leaning towards a potential easing of US Federal Reserve (Fed) monetary policy in its upcoming September meeting. According to the CME FedWatch tool, there is currently a 59% probability of a 25 basis point rate cut and a 41% chance of a 50 basis point cut by the Fed.
The US Dollar was further pressured by disappointing ADP Employment Change data released on Thursday. The report showed a modest increase of 99,000 private sector jobs in August, falling short of the 145,000 consensus estimate and marking a decline from July’s revised increase of 111,000.
Looking ahead, investors are closely monitoring the US employment data scheduled for release on Friday. The Non-Farm Payrolls (NFP) is projected to rise by 160,000 for August, compared to 114,000 in July, while the Unemployment Rate is expected to dip slightly to 4.2%. Weaker-than-expected readings could bolster expectations for a 50 basis point rate cut by the Fed, which might exert additional downward pressure on the US Dollar.
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