AUD/USD pulls back from six-week highs near 0.7300 as risk appetite sours pre-US jobs data

• AUD/USD has dropped back from six-week highs to the 0.7240s as risk appetite sours pre-US jobs data release.
• But the pair is holding onto substantial gains on the week amid a cocktail of bullish tailwinds.

AUD/USD has pulled back from the six-week highs it hit earlier in the session in the 0.7280s and is now trading about 0.3% lower on the day in the run-up to the release of key US official jobs data for May, with the Aussie one of the G10 underperformers as broader macro risk appetite takes a (modest) turn for the worse. But at current levels just below the 0.7250 mark, the pair is still trading with solid gains of about 1.2% this week.

That is mostly as a result of Aussie-specific tailwinds as a result of US dollar flows (indeed, the DXY is slightly north of positive on the week at the time of writing). Stronger than expected Q1 GDP data and robust monthly trade figures released this week came on the heels of recent hotter than expected Aussie Consumer Price Inflation numbers that have spurred bets that the RBA is going to quicken the pace of rate hikes at upcoming meetings.

Most analysts are betting the central bank lifts interest rates by 40 bps next Tuesday. Meanwhile, analysts are also citing this week’s easing of lockdowns in China as lifting spirits – China is Australia’s largest trade partner and export destination.

Upcoming US jobs data could trigger some volatility, but if the wage growth metrics signal an easing of wage pressures, AUD/USD may have an opportunity to recover back towards session highs near 0.7300 as markets pare their hawkish Fed bets. Attention will then turn to US ISM Services PMI survey data released at 1400GMT for a timely insight into the health of the dominant US services sector.