• The Aussie could not hold to its gains above 0.7100, outweighed by a strong US Dollar.
• US data showed the tightness of the labor market underpinned the greenback.
• Australia’s Services and Composite PMIs came more robust than the previous month’s data, though they remained in contractionary territory.

AUD/USD refreshed seven-month highs at around 0.7157 but collapsed as the US Dollar (USD) remained bid during Thursday’s session after market participants’ reaction to the US Federal Reserve (Fed) decision to lift rates weakened the greenback across the board. Nevertheless, the US Dollar stages a comeback, as shown by the AUD/USD exchanging hands at 0.7072 at the time of writing.

Upbeat US labor market data boosted the US Dollar

The AUD/USD dropped in the session, even though investors’ sentiment was upbeat. The US Federal Reserve decision hurt the US Dollar, as the Fed, led by Jerome Powell, stated that the US central bank has made progress curbing stubbornly high inflation amidst a tight labor market. Data revealed by the US Department of Labor (DoL) showed that Initial Jobless Claims for the last week ending on January 28 came at 183K below estimates of 200K, suggesting that companies had continued to hire personnel.

Therefore, the AUD/USD dwindled as traders brace for January’s US Nonfarm Payrolls report, with consensus at 185K, below the previous month’s reading of 223 K. Any readings above the consensus would keep the Fed on its tightening cycle. Still, Powell said that terminal rates are around the corner.

Regarding Australia, its economic calendar featured the Judo Bank Services and Composite PMI on its Final readings, at 48.6 and 48.5, respectively. Although the readings came higher than the previous month’s data, they remained in contractionary territory, portraying a gloomy scenario for the Australian Dollar (AUD)