US Non-Farm Payrolls Report Sparks AUD/USD Sell-Off Amid Growing Fears of Recession

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On April 6, the Australian Dollar struggled to keep pace with its major currency counterparts, posting a lacklustre performance throughout the trading day.

The US Dollar fell following the release of initial jobless claims, which came in at 228k, higher than the median estimate but still representing a decrease from the revised 246k figure from the previous period. While there was an initial boost to sentiment for the currency, it soon reversed course as investors focused on declining jobless claims. 

A separate report indicated that US-based employers reported 89.7k job cuts in March, a 15% increase from the previous month. The initial reaction to these developments was a weakening of US equities and a strengthening of the safe-haven US Dollar, ultimately pushing AUD/USD lower.

Despite this initial market response, Wall Street equities later reversed losses and finished in the green by the end of the day. However, with US markets closed for the Good Friday holiday, liquidity will be reduced, and there is an increased risk of volatility should an unexpected outcome occur.

The Citi Economic Surprise Index has fallen since late February, indicating that economic outcomes have been weaker than estimated. 

“Since the middle of January, the data has started outperforming expectations,” stated a recent research report from Peter Tchir at financial company Academy Securities in New York.

“A lot of the data was simply good, especially on the job front,” Tchir wrote.

As most trading exchanges are expected to be offline until next week, investors and traders are shifting their attention toward the US jobs report and its impact on currency markets. 

This is due to mounting concerns surrounding the US banking system, contributing to fears of an impending recession. If the non-farm payrolls (NFP) print comes in weaker than expected, it could fuel risk aversion among traders and further exacerbate the situation.

With global market sentiment remaining fragile, ongoing economic uncertainties and geopolitical tensions may continue to weigh on the currency’s short to medium-term performance.

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