Will AUD/USD Rally Continue After US Jobs Data?

The Australian dollar has reached a six-week high against the US dollar, with the AUD/USD pair jumping to 0.6588. This surge is primarily driven by a weak US Nonfarm Payrolls (NFP) report for August, which has increased expectations for an upcoming Federal Reserve interest rate cut.

According to the US Bureau of Labor Statistics (BLS), the US economy added a mere 22,000 jobs in August, significantly lower than the 75,000 forecast. This soft jobs data, coupled with a rise in the unemployment rate to 4.3% and steady wage growth, has prompted traders to fully price in a 25-basis point rate cut by the Federal Reserve at its September meeting. Futures contracts for the Fed funds rate now indicate that the market anticipates a total of 67 basis points of easing by the end of the year.

While the AUD/USD pair currently trades at 0.6565, up 0.40%, market participants are now looking ahead to next week’s US Consumer Price Index (CPI) release. Continued signs of disinflation in the CPI report could further increase the likelihood of a more aggressive rate cut by the Fed.

Meanwhile, the Australian dollar’s performance is also influenced by other factors. The domestic outlook will be guided by the release of the Westpac Consumer Confidence report next week, and the AUD will continue to be sensitive to incoming economic data from China.