AUD/USD shows resiliency in the face of downside risks
Oct 2 (Reuters) -AUD/USD traded nearly unchanged Wednesday and near the 19-month high struck in September as investors appear focused on bullish influences despite intensifying downside risks.
Above estimate U.S. ADP and JOLTS data helped buoy Treasury yields US2YT=RR and also drive broad based U.S. dollar =USD gains as investors lean towards the Fed not cutting as aggressively as previously expected.
Increased geopolitical tensions in the Middle East drove investors into safe-haven assets and out of most riskier plays.
Economic uncertainty has increased on sluggish euro zone growth and striking U.S. port workers.
But AUD/USD investors appear more focused on upside influences.
Commodities DCIOc2, HGv1 and Chinese equities .HSI have put in impressive rallies due to China stimulus which could have a positive impact on Australia's economy.
Australian yields AU3YT=RR gained on China stimulus and higher probabilities the RBA may delay rate cuts until 2025 as inflation remains sticky.
Investors expect the Fed's rate cut cycle to be more aggressive than the RBA's, pricing in more than 175bps of U.S. easing but only about 100bps for the RBA.
Those bullish influences have helped to prop up AUD/USD ahead of the September non-farm payrolls report.
A below-estimate result would reinforce bullish influences, potentially allowing AUD/USD to rally towards 0.7100.
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(Christopher Romano is a Reuters market analyst. The views expressed are his own)
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