US dollar surge and strong jobs data weigh on AUD<\/p>\n
AUD\/USD<\/a>\u00a0finished lower last week at 0.7045 (-1.93%), with the bulk of the fall coming on Friday night as the United States (US) dollar surged on risk aversion flows and a stronger-than-expected non-farm payrolls<\/a> report.<\/p>\n The greenback\u2019s resurgence was unmistakable after the US economy added a robust 172,000 jobs in May, well above expectations, accompanied by solid upward revisions to prior months. That report supercharged bets on a Federal Reserve (Fed)<\/a> rate hike later this year and triggered a bout of risk aversion flows that weighed heavily on the broader risk complex, including US equities and the Aussie.<\/p>\n Softer Aussie data and yield differentials add pressure<\/p>\n Adding to the downward pressure on AUD\/USD has been a fall in metals prices and a continuation of softer domestic data this week. Consumer confidence fell 2.9% in May to 80.6, remaining in deeply pessimistic territory as households buckle under the weight of Reserve Bank of Australia (RBA) rate hikes, high inflation<\/a> and an unpopular Federal Budget. Meanwhile, the National Australia Bank (NAB) business survey, a metric closely watched by the RBA, showed confidence improved slightly to -14 but remained undeniably weak across all industries.<\/p>\n This run of softer domestic data was the primary catalyst behind NAB Chief Economist Dr Sally Auld\u2019s revised view. She noted she no longer expects another RBA rate hike in this cycle and now sees the next move as a cut.<\/p>\n Consequently, after starting this month fully priced for another 25 basis point (bp)<\/a> rate hike by year-end, the local interest rate market is now only pricing in 17 bp, roughly a 70% chance, of a final RBA hike. This contrasts with the US, where a stronger run of data now sees a full Fed rate hike priced in before the end of the year.<\/p>\n