AUD/USD falls from daily highs above 0.6460 despite RBA rate hike after upbeat US data

• The Australian Dollar is on the defensive at the mercy of heightened US T-bond yields, despite RBA’s rate hike.
• The Federal Reserve has a green light to continue its aggressive cycle after US PMIs remained at expansionary territory.
• The US labor market remains tight, as shown by the JOLTS report.

The AUD/USD slid for the fourtñ-consecutive day, courtesy of broad US Dollar strength, after manufacturing activity in the United States flashed the economy’s resilience, albeit that the Reserve Bank of Australia (RBA) lifted rates by 25 bps, which bolstered the AUD ahead of the US session. At the time of writing, the AUD/USD is trading a 0.6387,

The USD got bolstered by data, weighing on the AUD

The market sentiment remains downbeat, as shown by US equities trading with losses. The ISM Manufacturing report for October was better than forecasts at 50.2 vs. 50 estimated, while a subcomponent that measures prices fell to more than a two-year low. Meanwhile, an earlier report was a prelude for ISM data, with S&P Global PMI Manufacturing Index for the same period slowed. Still, it was above estimates of 49.9, at 50.4, but below the September figure.

Also, the US Labor Department revealed September’s JOLTS data, which unexpectedly rose above estimates of 10M to 10.717M, topping August’s 10.28M.

The AUD/USD reacted to the downside, weighed by a jump in US T-bond yields, particularly the 10-year, reclaiming the 4% threshold. The pair dived from around 0.6437 to 0.6380.

Aside from this, in the Asian session, the Reserve Bank of Australia (RBA) lifted rates by 25 bps, as expected, leaving the cash rate at 2.85%. The RBA Governor Philip Lowe commented that the central bank was seeking to return inflation to the 3% target, which according to the central bank forecasts, would be achieved by 2024.

Given that quarterly inflation rose by 7.3%, the RBAs acknowledged that monetary policy operates with a lag, so the path of slowing from 50 to 25 would allow the RBA to assess consumer spending amidst an uncertain global economic outlook.

What to watch

Ahead in the week, the Australian economic calendar will feature the AI Group Manufacturing Index for October, alongside housing data and the RBA Chart Pack. On the US front, the docket will reveal the Mortgage Rate update, the ADP Employment Change, and the Federal Reserve policy decision.

AUD/USD Key Technical Levels