Australian Dollar softens on strong US jobs data, Middle East tensions
The AUD/USD pair extends the decline to near 0.6885 during the early Asian session on Monday. The US Dollar (USD) strengthens against the Australian Dollar (AUD) amid stronger-than-expected US employment data and ongoing geopolitical tensions in the Middle East. The US March ISM Services Purchasing Managers Index (PMI) data will be the highlight later on Monday.
Data released by the US Bureau of Labor Statistics (BLS) on Friday showed that the US Nonfarm Payrolls (NFP) rose by 178K in March. This figure followed a 133K decline (revised from -92K) and came in well above market expectations for a 60K gain. The Unemployment Rate ticked lower to 4.3% in March from 4.4% in February.
US President Trump on Sunday escalated his threats to bomb Iranian power plants starting Tuesday and bring “Hell” to the country after US forces rescued an airman from Iran more than a day after his fighter jet was shot down.
Escalating tensions between the US and Iran and concerns over the Strait of Hormuz closure continue to boost a safe-haven currency such as the Greenback and create a headwind for the pair in the near term.
Market expectations for the May meeting lean toward another potential rate hike due to rising oil prices and a tight labor market. Westpac analysts expect the Reserve Bank of Australia (RBA) to deliver three further rate hikes in 2026. This would take the cash rate to 4.85%, a level not seen since November 2008.
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