The Australian Dollar (AUD) strengthened against its major currency peers, trading 0.23% higher near 0.6940 against the US Dollar (USD) during the European trading session on Friday [1]. This upward movement was attributed to a combination of improved risk sentiment and a reduction in expectations for further hawkish action from the US Federal Reserve. The S&P 500 futures rose by 0.22% to around 7,500, reflecting a risk-on market mood, while the US Dollar Index (DXY) fell 0.1% to near 100.75 [1].
Market data showed that the odds of the Federal Reserve delivering at least one interest rate hike in its September policy meeting dropped to 53.2%, down from nearly 64% on Wednesday, according to the CME FedWatch tool [1]. This shift followed the release of weaker-than-expected US Nonfarm Payrolls (NFP) data for June, which reported the creation of 57,000 new jobs, significantly below the estimated 110,000. Additionally, May's NFP figure was revised downward to 129,000 from 172,000 [1].
On the domestic front, the Australian Dollar was further supported by hawkish signals from the Reserve Bank of Australia (RBA). Minutes from the RBA's June policy meeting, released on Tuesday, indicated that the central bank is prepared to take necessary steps to ensure price stability, including potential rate hikes [1]. These remarks contrasted with market expectations that the RBA's monetary tightening cycle had concluded [1].
The AUD was the strongest against the Canadian Dollar among major currencies, as shown in the day's percentage change table [1]. The combination of a softer US Dollar, risk-on sentiment, and renewed hawkishness from the RBA contributed to the AUD's outperformance.
CONCLUSION
The Australian Dollar advanced on Friday, buoyed by a combination of weaker US jobs data, reduced Fed rate hike expectations, and hawkish signals from the RBA. Market sentiment turned risk-on, supporting the AUD's gains against major peers. The outlook for the AUD remains sensitive to further central bank communications and US economic data.