RBA Hikes Rates as US Jobs Data Disappoints
The Reserve Bank of Australia (RBA) raised its cash rate by 25 basis points to 4.60% last Tuesday, marking its fourth hike this year. Governor Michele Bullock noted that more rate increases are possible, though the board considered both a hold and a hike. This comment led to a fade in the initial AUD/USD upside, offering a short-selling opportunity for traders.
The Australian dollar (AUD) faced additional pressure after the August CPI inflation data was released the day after the RBA decision. Headline inflation rose to 4% year-over-year (YY) from 3.5% in July, slightly below the 4.1% consensus. The RBA’s preferred trimmed mean held steady at 3.6% YY for the third month, but traders reacted negatively to both the headline and trimmed-mean prints coming in below expectations.
In the US, the August PCE numbers released last Wednesday fell short of expectations. Headline inflation matched July’s 3.4% YY, defying the market’s 3.7% consensus, while core inflation also matched July’s 3%, rejecting the 3.3% estimate. Despite these soft numbers, the US dollar swiftly regained lost ground.
The September US employment report, released last Friday, showed a significant miss in payrolls, with only 29,000 jobs added compared to the market’s median estimate of 90,000. Revisions further reduced July and August’s figures by a combined 60,000. The unemployment rate ticked up to 4.2% from 4.1%, while the labor force participation rate rose to 61.8% from 61.6%.