AUD/USD Crushed by Strong US Data and Surging Treasury Yields

The Australian dollar (AUD) took a sharp hit on Wednesday as strong US data sent Treasury yields and the US dollar sharply higher, leading to its worst daily fall in over three months.

The surge in bond yields was fueled by flash PMIs that reached a five-year high according to S&P Global, reinforcing hawkish Fed expectations. This, in turn, led to a sharp Treasury sell-off as markets priced a more hawkish Fed path, further pressuring the AUD/USD pair.

AUD/USD is now within striking distance of the 70c handle and is expected to test it, given its downside momentum. The RBA meeting next week will be closely watched, but today's labour report may hold more significance for the path beyond next week, as a stronger jobs report would reinforce further tightening, while a rise in unemployment towards 5% could strengthen the view that the RBA is approaching the end of its hiking cycle.