AUD/USD jumps to near 0.6590 as US Dollar underperforms its peers

• AUD/USD advances to near 0.6590 as Fed dovish expectations improve demand for riskier assets.
• Bets supporting a 50-bps interest rate cut by the Fed in the September policy meeting have emerged.
• US NFP report August showed signs of cracks in job market.

The AUD/USD pair climbs to near 0.6590 during the European trading session on Monday. The Aussie pair strengthens as the US Dollar (USD) underperforms its peers, following the emergence of market expectations that the Federal Reserve (Fed) could cut interest rates by a larger-than-usual pace of 50 basis points (bps) in the policy meeting next month.

During the press time, the US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, trades lower to near 97.60.

According to the CME FedWatch tool, traders see a 10% chance that the Fed could cut interest rates by 50 bps in the policy announcement on September 17. Fed dovish bets for a jumbo interest rate cut have stemmed from signs of cracks in job market shown by the United States (US) Nonfarm Payrolls (NFP) report for August released on Friday.

The US NFP report showed that employers hired 22K fresh workers, the lowest reading seen since January 2021. The Unemployment Rate accelerated to 4.3%, as expected, from the prior reading of 4.2%.

Going forward, investors await the US Producer Price Index (PPI) and the Consumer Price Index (CPI) data for August, which will be published on Wednesday and Thursday, respectively.

Meanwhile, upbeat market sentiment due to firm Fed dovish expectations have increased the demand of risker assets, such as the Australian Dollar (AUD). The antipodean is outperforming a majority of its peers, expect its neighbour New Zealand Dollar (NZD).

This week, Australian economic calendar will be light, therefore, market expectations for the Reserve Bank of Australia's (RBA) monetary policy outlook will be key trigger for the Aussie Dollar.