AUD/USD turns upside down after US NFP

• AUD/USD fell to near 0.6700 after the release of US NFP data for August.
• Disappointment over US jobs growth data boosts hopes of Fed rate cut.
• RBA Bullock’s dovish interest rate guidance failed to lift the Aussie.

AUD/USD gives up intraday gains and turns negative in Friday’s North American session. The Aussie asset fell to near 0.6700 on the back of the United States (US) Nonfarm Payrolls (NFP) data for August, which significantly increased buying interest in the US dollar (USD).

The US Dollar Index (DXY), which tracks the value of the greenback against six major currencies, is reversing its downward move and climbing to near 101.40.

The US NFP report indicated that job demand remained weaker than expected. Fresh payrolls came in lower at 142,000 than expectations of 160,000, but higher than July’s release of 89,000, revised down from 114,000. The unemployment rate fell to 4.2%, as expected, from the previous release of 4.3%.

Disappointing US jobs data gave the Federal Reserve (Fed) a green signal to begin tapering policy easing this month. Weak US jobs data also fueled market expectations that the Fed could start cutting interest rates aggressively.

According to the CME FedWatch tool, the likelihood that the Fed will start cutting interest rates by 50 basis points (bps) to 4.75%-5.00% rose to 45% from 30% a week ago.

In the Asia-Pacific region, the Australian dollar (AUD) is underperforming despite firm speculation that the Reserve Bank of Australia (RBA) is unlikely to cut interest rates this year. Prospects for the RBA to keep interest rates at their current levels until the end of the year have strengthened following unwavering guidance from RBA governor Michele Bullock. Bullock said in his speech at the Anika Foundation on Thursday: “If the economy is performing broadly as anticipated, the board does not expect to be able to cut rates in the near term.”