AUD/USD grapples with Greenback resurgence

• AUD/USD tested seven-week highs on Tuesday before settling back.
• The US Dollar saw a resurgence after bets of Fed rate cuts kicked higher again.
• US jobs data continues to get revised lower.

AUD/USD briefly toyed with a seven-week high north of 0.6600 before settling back and paring intraday gains. Tuesday saw another sharp downside revision in US jobs data, reigniting market-wide glee for Federal Reserve (Fed) interest rate cuts.

Not all is glimmery on the FX front, however. The recent annual revision of Nonfarm Payrolls (NFP) indicates that the US economy added around 900K fewer jobs than previously anticipated for the period from March 2024 to March 2025. Data analysts should expect further downward revisions to 2025 employment figures, as current revisions do not include the effects of the post-tariff economic changes.

NFP figures have gained notable significance recently, partly due to the Trump administration's attempts to politicize these estimates. However, achieving deeper accuracy is challenging, especially since a survey sample cannot perfectly reflect the economy at a time when the President can enact drastic policy changes with a single decision on a Friday afternoon.

Fed rates still rule the market

According to the CME's FedWatch Tool, the market now considers a 25 basis point interest rate cut on September 17 as almost certain. Some aggressive rate traders are even pricing in over a 17% chance that the Fed might be pressured, either by economic data or political influences, into a 50 basis point cut next week.

The upcoming US Consumer Price Index (CPI) inflation report, expected this Thursday, is projected to show that inflation remains well above the Fed's 2% target. This complicates the Fed's ability to cut interest rates quickly, regardless of whether policy rates are above or below the natural rate of interest, known as r-star.

AUD/USD daily chart