AUDUSD collapsed on Monday after blistering US NFP data lifted the US dollar.
The market will see the RBA’s decision on rates. Will the AUD turn around?
AUDUSD – Daily Chart
The US January nonfarm payroll rebooted at 517K, much higher than the market expected at 185K. The January unemployment rate was slightly low, at 3.4%, compared with 3.5% last month. The US dollar and US bond yields surged after the strong jobs report. The new statistics revealed a US labour force that is running hot; the market was forced to recalibrate expectations for the peak in the Fed’s rate hike cycle. The US dollar index climbs to 103, ending three weeks of downward movement. The AUDUSD fell below the 70-cent level, followed by the US dollar’s strength.
The Australian CPI is expected to be an uncomfortable 7.8% year-on-year to the end of 2022, well above the mandated target range of 2-3%. They previously expected inflation to hit 8% by the end of 2023. The re-acceleration of price pressures into the end of last year will not sit well with the board, and they will likely need to turn more hawkish. Should this unfold, it could have implications for the Australian dollar.
On Tuesday, the RBA will decide on the cash rate. Futures are pricing a 25 basis point hike, from a 3.1% rise to a 3.35% rise. Then, the focus will turn to Governor Philip Lowe and his remarks post-decision.
