• AUD/USD remains heavy, extending its weekly losses by 2.28%.
• Mixed US economic data bolstered the greenback, which trimmed Thursday’s losses.
• Australia’s non-farm average earnings jumped 5.0%, opening the door for inflation’s upside.

The AUD/USD is erasing Thursday’s gains after a hotter-than-estimated US inflation report, dropping below 0.6300 due to a risk-off impulse in the markets as traders re-position themselves for another jumbo-size Fed rate hike in November, while the greenback advanced. At the time of writing, the AUD/USD is trading at 0.6225, below its opening price, after hitting a daily high of 0.6349 in the early European session.

AUD/USD gives way below 0.6300 on deteriorated sentiment and broad US dollar strength

Sentiment remains dampened, as shown by falling stocks in the US. Further US economic data showed that consumer spending is weakening, as demonstrated by September’s Retail Sales coming at 0% MoM, below estimates, and August’s 0.3%. Annually based sales slowed by 8.41% annually, while the University of Michigan Sentiment improved edged higher to 59.8, exceeding estimates, though inflation expectations for one year heightened to 5.1%, up from August’s 4.7%.

In the meantime, Fed officials George, Daly, and Cook crossed news wires. The Fed’s rhetoric stays the course, with the three of them repeating that inflation is too high, that rates need to get into restrictive territory, and that the Federal funds rates (FFR) must be at around 4%.

In the meantime, the US Dollar Index, a measure of the buck’s value vs. six currencies, trims Thursday’s losses, up 0.72% at 113.250, a headwind for the AUD/USD.

On the Australian side, non-farm average earnings climbed 5.0% YoY in the second quarter, almost double the Wage Price Index at 2.6% YoY. Therefore, it increases the likelihood of higher inflation in Australia amid a deceleration of the RBA’s rate hikes, despite futures traders expecting rates to peak above 3%.

AUD/USD Key Technical Levels