The Australian Dollar (AUD) edged higher against the US Dollar (USD), with the AUD/USD pair trading around 0.6955 during the early Asian session on Monday. This upward movement was primarily driven by weaker-than-expected US jobs data, which weighed on the USD. According to the US Bureau of Labor Statistics, Nonfarm Payrolls increased by 29,000 in September and 133,000 in August (revised from 162,000), both figures falling short of the market consensus of 90,000 for September [1].
Following the release of the soft jobs data, market expectations for a Federal Reserve (Fed) interest rate hike in October decreased, with the probability dropping to nearly 22.1%. However, the likelihood of a rate hike in December remains high at 87.2%, as indicated by the CME FedWatch Tool [1]. Despite this, Fed’s Logan delivered a notably hawkish message, emphasizing the need for at least 50 basis points more in rate hikes and suggesting that policy is not yet restrictive enough to bring inflation down to 2% [1].
On the Australian side, the odds of the Reserve Bank of Australia (RBA) raising interest rates in November have fallen sharply after the latest Consumer Price Index (CPI) data came in line with expectations. Money markets now see only a 20% probability of a rate hike at the RBA’s November meeting, according to LSEG data [1]. Analysts at Commerzbank argue that the recent data support a cautious approach, noting that "1.5 additional rate hikes by the RBA– as the market was still expecting yesterday – are likely to be too much." They highlight ongoing challenges in the real estate sector, with building permits falling by 6.1% in August and declining prices in major cities, suggesting the RBA would be "well advised to wait and see how things develop in the coming months" [1].
Overall, while the AUD has gained some ground due to softer US data, analysts believe the currency is unlikely to receive further significant tailwind, given the RBA’s cautious stance and ongoing domestic economic pressures [1].
CONCLUSION
Softer US jobs data has boosted the Australian Dollar, but both the Fed and RBA are signaling caution regarding further rate hikes. Market participants are now less certain about imminent policy tightening, and analysts expect the AUD’s upside to remain capped amid domestic and global uncertainties.