US Dollar Soars as Strong Jobs Report Sparks Rate Hike Bets

The US dollar strengthened after a stronger-than-expected jobs report on Friday, while the Australian dollar paused at four-month highs. The US payrolls rose by 162,000 in August, beating the forecast of 55,000, and prior months were revised up by 55,000. Unemployment held steady at 4.1%, and wage growth remained firm.

The jobs report increased the chances of a Federal Reserve rate hike to above 60% for September, with Wednesday's US CPI report now decisive for the Fed's next move. The US dollar index rose 0.3% after the jobs report, climbing from two-week lows. Safe-haven currencies posted significant losses, while Asian currencies bucked the trend.

The Australian data points to higher interest rates, with a rate hike expected in September. This shift follows stronger-than-expected July inflation, better-than-forecast Q2 GDP reading, and surprise jump in household spending. The risk now leans towards two 25bp rate increases rather than no move at all.