The Australian Dollar Tanked Ahead of the RBA Meeting as the US Dollar Roared Back to Life. Is AUD/USD Falling?

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On Friday, the Australian Dollar fell after blistering US non-farm payroll numbers boosted the US Dollar.

According to the statistics, the US labour market saw a contraction amid a hot labour market. The market was forced to recalibrate expectations for the peak in the Federal Reserve’s rate hike cycle.

During January, 517k jobs were added, according to the US Bureau of Labor Statistics, which was far above the 188k anticipated. The last month’s job figure of 223k was revised by 260k to reflect the total. In light of this, the unemployment rate is now at 3.4%, down from 3.6% in the forecast and 3.5% in the previous month.

AUD/USD has been a victim of bad news from both sides of the Atlantic and could soon fall below parity. Because the Federal Reserve has now been seen to be tightening further than previously thought, equity markets and risk assets, in general, are under pressure to begin the week.

As the Federal Reserve now aims to raise rates, Tuesday’s speech from Chairman Jerome Powell is expected to draw much attention.

The RBA will have decided on the cash rate by the time he speaks; futures are pricing a 25 basis point hike. Everyone now turns their attention to Governor Philip Lowe’s remarks following the RBA’s decision.

“RBA policy influence on the Australian dollar remains quite limited,” said Ray Attrill, head of FX strategy at National Australia Bank Ltd. in Sydney.

“The Australian dollar has never fared well when a global slowdown or recession is upon us, while the dollar still looks rock solid.” 

By the end of 2022, the Australian CPI is expected to remain at an uncomfortable 7.8% year-on-year, which is much higher than the mandated target range of 2-3% that was set. In their previous statement, they said that it was expected that the inflation rate would reach 8% by the end of 2023.

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