AUD/USD declines to near 0.6300 on upbeat US NFP report

• AUD/USD has dropped to near 0.6300 after robust US job data.
• The US laborforce witnessed 336K fresh payrolls, much higher than estimates of 170K.
• Fed Mester was ‘loud and clear’ that the central bank is not done with hiking interest rates.

The AUD/USD pair has faced an intense sell-off to near 0.6300 after the better-than-projected United States Nonfarm Payrolls (NFP) report. The Aussie asset shifted into a bearish trajectory as the market mood has turned cautious as the expectations of one more interest-rate hike from the Federal Reserve (Fed) has accelerated.

The S&P500 opened on a bearish note after the upbeat US job growth in September. The US laborforce witnessed 336K fresh payrolls, much higher than estimates of 170K and the former release of 227K. The jobless rate remains steady at 3.8%, nominally higher than expectations of 3.7%. The monthly wage rate grew by 0.2% but was lower than expectations of 0.3%. The annualized wage rate decelerated to 4.2% vs. the estimates and the former release of 4.3%.

Meanwhile, the US Dollar Index (DXY) jumps to near 106.80 as the odds of one more rate hike from the Fed has increased. As per the CME Fedwatch tool, the chances for interest rates remaining unchanged at 5.25-5.50% have dropped to 70% from 81% after the NFP data release. Also, trades see a 39% chance for Fed increasing rates to 5.50-5.75% by the year-end.

This week, Cleveland Fed Bank President Loretta Mester was ‘loud and clear’ that the Fed is not done with hiking interest rates. Fed Mester said that one more interest rate hike is well-needed this year and they are required to remain high for a longer period. Interest rates should remain high for long enough until the central bank assess the impact of policy-tightening yet done.

On the Aussie front, the Australian Dollar remained under pressure as the Reserve Bank of Australia (RBA) kept the interest rates unchanged at 4.1% as expected by the market participants. The RBA kept monetary policy steady for the fourth time in a row.