AUD/USD Fall Continues After Nonfarm Payrolls

02/06/2023

1 minute read

2023.02.06 06:47

The is steady on Monday, trading at 0.6912, following a miserable week’s end.

The market was shocked by the US’s blowout in January. The economy added a staggering 517,000 new jobs, exceeding the previous estimate of 260,000 and exceeding the estimate of 185,000. The unemployment rate dropped to 3.4 percent, the lowest level since 1969. With a reading of 55.2, which was higher than the forecast of 50.4 points and brought it back into expansion territory from 49.2, there was more encouraging news.

After the employment report, the US dollar rose against the majority of major currencies, even though equity markets were down. On Friday, the Australian dollar fell by 2.2%. The employment report has dispelled those hopes that the Fed would issue a “one and done” rate increase in March, putting an end to the current rate-hike cycle.

The Fed doesn’t like how hot the labor market is, and wage growth is still a big factor in inflation. Mary Daly, a member of the Fed, referred to the employment release as a “wow number” and described the December forecast of a peak rate of 5.1 percent as a “good indicator” of Fed policy.

When the RBA announces its monthly rate on Tuesday, it will be in the news. Rates are anticipated to rise by 25 basis points, reaching a 10-year high of 3.35 percent. This would be the RBA’s fourth 25 bp rate increase in a row as it fights inflation with steady but modest rate increases.

Today’s retail sales report, which showed a decline of -3.9%, is one example of a sign that rising interest rates are starting to hurt the economy. The cash rate is expected to reach its highest point around 3.6%, but it could rise even higher if inflation remains more stubborn than anticipated. The robust employment market enables the central bank to raise rates as needed.