AUD/USD remains on the defensive near the 0.6780 mark amid a stronger USD
- AUD/USD remains on the defensive near the 0.6780 mark on the back of US Dollar strength.
- The Australian job data hint at another hike after a July pause.
- The US Jobless Claims boost the US Dollar across the board.
- Market participants await next week's Federal Open Market Committee (FOMC) meeting.
The AUD/USD pair holds ground near the 0.6780 mark in the early Asian session. The pair attracts some follow-through selling on the back of US Dollar strength. The US Dollar Index (DXY) surges to 100.80 as the US Initial Jobless Claims data fell to 228K, the lowest level since mid-May.
On Thursday, the Australian Bureau of Statistics revealed that 32.6K new payrolls were added to the labor market, above the consensus of 15K and lower than the previous month's 76.5K. Meanwhile, the unemployment rate remained constant at 3.5%, above the expectation of 3.6%. Tight labor market conditions would require the Reserve Bank of Australia (RBA) to resume policy tightening beginning in August after holding interest rates unchanged at 4.10% in July.
On the other hand, the weekly data published by the US Department of Labour (DOL) showed on Thursday that Initial Jobless claims totaled 228,000 in the week ending July 15, against the expectation of 242,000 and lower than 237,000 prior. The figure showed the lowest reading since mid-May.
Additionally, the Philadelphia Federal Reserve Manufacturing Survey came in at -13 versus the consensus of -10. While Existing sales from June also showed a contraction of 3.3% MoM in June against a 0.2% prior gain.
The Federal Reserve (Fed) is expected to raise interest rates by 25 basis points (bps) next week. However, the possibility of an additional rate hike before the end of the year increased somewhat after the latest report. This, in turn, boosts the US Dollar across the board.
Apart from this, the renewed trade war tensions between the US-China might exert pressure on the AUD/USD pair as the Aussie is perceived as a proxy for the Chinese economy. On Thursday, China's Ambassador Xie Feng criticized the US's consideration of foreign investment and AI chip restrictions. He added that China would retaliate if the US imposed more curbs on its chip sector in Beijing.
In the absence of any relevant economic data releases from Australia on Friday, market participants await the Flash Australian Purchasing Managers' Index (PMI) and the Federal Open Market Committee (FOMC) meeting. The interest rate decision could significantly impact the US Dollar dynamic and give the AUD/USD pair a clear direction.
Author
Lallalit Srijandorn
FXStreet
Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.
