Aussie Dives on Safe-Haven Rush Ahead of US Jobs Data

The Australian Dollar (AUD) plummeted against the US Dollar (USD) as investors flocked to safe havens before the highly anticipated US Nonfarm Payrolls (NFP) data release at 13:30 GMT. The Aussie tumbled below the critical support level of 0.6700 in early New York trading.

Market Jitters Fuel USD Rally:

Gloomy Outlook: S&P500 futures dipped in the European session, reflecting a cautious market mood.
USD Soars: The US Dollar Index (DXY) surged to a fresh three-week high at 102.70.
Yields Climb: 10-year US Treasury yields jumped to near 4.04%, further bolstering the Dollar’s appeal.

NFP in Focus:

Market Volatility Looms: The NFP release is expected to trigger significant volatility in the FX market.
Modest Jobs Growth Forecast: TD Securities analysts anticipate a steady 150,000-200,000 increase in payrolls for the third consecutive month.
Unemployment Uptick Predicted: They also project a slight rise in the unemployment rate to 3.8% from 3.7% in November.

Rate Cut Narrative at Risk:

Strong Jobs Data Could Derail March Cut Expectations: A robust NFP report could challenge the current narrative of potential Fed rate cuts starting in March.
Fed Hawks Circle: Recent hawkish comments from Fed policymakers have already dampened hopes for early rate cuts.

Aussie Dollar Eyes Retail Sales:

Consumer Spending in Focus: Australian Dollar investors will turn their attention to November’s monthly retail sales data on Tuesday.
Growth Expected: A 1.2% increase in consumer spending is forecast, following a 0.2% decline in October.
RBA Policy Implications: Strong retail sales could support the Reserve Bank of Australia’s (RBA) argument for maintaining elevated interest rates for longer.

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In a nutshell:

  • The AUD/USD is under pressure due to safe-haven flows ahead of the US NFP data.
  • A strong NFP report could boost the USD and challenge hopes for early Fed rate cuts.
  • Australian Dollar investors await November retail sales data, which could influence the RBA’s policy stance.
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