AUD/USD DECLINES TO NEAR 0.6650 AS US DOLLAR RECOVERS AHEAD OF US INFLATION

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  • AUD/USD falls sharply to near 0.6650 amid strength in the US Dollar.
  • Traders pare Fed large interest rate cut bets as US recession fears diminish.
  • A sharp deflation in China’s PPI weighs on the Australian Dollar.

The AUD/USD pair slides to near 0.6650 in Monday’s North American session. The Aussie asset weakens as the US Dollar (USD) extends its recovery, with traders paring Federal Reserve (Fed) large interest rate cut bets on diminished United States (US) recession fears. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, jumps to near 101.60.

Fears of the US entering a recession receded after the release of the Friday’s Nonfarm Payrolls (NFP) data for August, which indicated that the pace of slowdown in the job growth in not as fast as it appeared in July figures. The data showed that US employers hired 142K job-seekers in August, fewer than estimates of 160K but significantly higher than the prior release of 89K.

Moderate growth in the US job market forced traders to pare bets supporting large interest rate cuts from the Federal Reserve (Fed) this month. According to the CME FedWatch tool, the possibility for the Fed reducing interest rates by 50 basis points (bps) to 4.75%-5.00% in September is 25%, while the rest favors a 25-bps interest rate cut.




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