AUD/USD Bounces Back as US Dollar Falters on Hawkish RBA

The Australian Dollar resumed its advance on Friday after briefly falling following the stronger-than-expected US employment report. The AUD/USD pair initially dropped to 0.7173 before reversing as the US Dollar struggled to capitalize on the upbeat figures, despite increasing expectations of a Federal Reserve rate hike at the September 15-16 meeting.

The US Nonfarm Payrolls (NFP) increased by 162K in August, surpassing market forecasts for a 56K gain. The Unemployment Rate remained steady at 4.1%, as expected, while July's reading was revised higher to 21K from the previously reported 23K decline.

The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, trades around 99.10 after climbing to 99.36. According to the CME FedWatch Tool, markets now price in around a 60% chance of an increase, up from 50% before the NFP release.

Uncertainty over the Fed's policy path persists, with the outcome of the September meeting likely to hinge on next week's US Consumer Price Index (CPI) and Producer Price Index (PPI) reports. Cleveland Fed President Beth Hammack stated that 'inflation is too high, and the longer it stays above our objective, the harder it will be to bring it back down.'

The Australian Dollar remains supported by the RBA's hawkish stance, with traders anticipating another rate increase later this month as inflation sits above the central bank's 2%-3% target band.