AUD/USD Plummets Amid Strong US Data
The Australian dollar (AUD/USD) experienced its worst daily fall in over three months as strong US economic data led to an increase in Treasury yields and a surge in the value of the US dollar.
This sharp rise in US yields was fueled by the release of flash PMIs, which showed a five-year high for the composite index. As a result, markets began to price in a more hawkish Federal Reserve (Fed) path, leading to a sell-off in Treasury bonds and a subsequent increase in the value of the US dollar.
The AUD/USD pair bore the brunt of this shift, falling as the US dollar strengthened against all major currencies. The Australian jobs data release was overshadowed by the surge in US yields, with market pricing and economists already expecting a hike from the Reserve Bank of Australia (RBA) next week.
The RBA's meeting is now seen as less significant, with Governor Michelle Bullock stating that an unemployment rate of 4.5%, 5% could help cool inflation pressures. A stronger jobs report would reinforce the case for further tightening, while a rise in unemployment towards 5% could strengthen the view that the RBA is approaching the end of its hiking cycle.