The potential for diverging central bank expectations might be the catalyst needed to push the Australian dollar significantly lower in the short term, following weak Australian employment data and much hotter-than-expected U.S. inflation.
Wednesday's U.S. CPI data prompted a spike in expectations for a rate hike by the Federal Reserve nL1N2S11BJ.
The Click here shows the market is pricing in a 68% chance of a rate hike at the June 15, 2022 FOMC meeting - up from a 51% chance before the CPI release.
The Reserve Bank of Australia has pushed back against market calls for official cash rate hikes before 2023, saying it will need hard evidence of sustained tightness in the labour markets that would result in wage inflation nL1N2RT05QnL1N2RT0K8.
Australia's October employment report Thursday was much weaker than forecast, but the survey was conducted while part of the country was in lockdown nL1N2S201L.
Nevertheless, it may throw some doubt on whether the labour market's recovery will be powerful enough to force the RBA to hike rates ahead of schedule.
The AUD/USD dropped to 0.7315 on the data, before finding buyers.
The 61.8 Fibonacci retracement of the September-October move comes in at 0.7317.
A sustained break below 0.7315 targets a full retracement to the Sept 29 low at 0.7170.
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