The rally seen in the Australian dollar in the past two weeks has been more attributed to external economic forces (the US and China).
On the US side of the equation, more evidence that the deterioration of the US labour market (weaker-than-expected non-farm payrolls data for August, unemployment rose to almost a 4-year high of 4.3%, and initial jobless claims for the week ending 6 September increased to 263,000, the highest level since October 2021).
All these latest lackluster US labour market data outweigh the risk of a sticky inflationary trend in the US due to the US White House’s trade tariffs, which have triggered the pricing of a more pronounced Fed dovish pivot that is likely to kickstart next week at the FOMC meeting on 17 September.
Today at 14:00 GMT, the preliminary September reading of the University of Michigan’s consumer sentiment index will be released, a key leading indicator of US demand-side conditions.
According to the Trading Economics website, market forecasts are at 58, a slight dip from August’s print of 58.2.
The major trend of the University of Michigan’s US consumer sentiment has been deteriorating since March 2024’s print of 79/4, and if September’s print is below expectations (below 58), it is likely to trigger higher odds of Fed’s rate cuts bets in 2026, and asserts further downside pressure on the US dollar, in turn, boosting indirect demand for AUD (see Fig. 2).
