AUD/USD bulls stampede despite hawkish Fed, Aussie jobs eyed

AUD/USD at 0.7173, is ending the day around 0.95% higher after travelling from 0.7092 and 0.7177 over the build-up and around the Federal Reserve event.

The AUD ended a choppy session firm despite an uber hawkish Fed. Treasury yields rose across the curve after the Fed announced an acceleration of tapering and a dot plot showing a more aggressive rate hike outlook. ''Expect this selling pressure to flow through to local rates markets at open before attention turns to RBA’s Lowe later this morning,'' analysts at ANZ Bank explained. 

The hawkish message from a faster taper was amplified by significant upward revisions to the dot plot. However, much of what was announced had already been priced in and the US dollar turned on a dime and ended the day lower.  For instance, the removal of “transitory” and the doubling of the taper had already been fully expected. What was unexpected, the dots were particularly striking. The median dot signals that there is expected to be three hikes next year, one more than previously indicated. 

Meanwhile, investors moved back over toward risk-on assets after the Fed announcement, with US stocks reversing earlier losses to touch a session high. This supported the Aussie, setting it up for a positive start for what could be another busy day. Markets have become more optimistic that Omicron will not impede the global economic recovery.

Additionally, analysts at ANZ bank explained that ''pledges from China to support economic growth also helped alleviate some of the fears. Markets now expect further monetary policy easing in China after the People’s Bank of China said it will reduce bank reserve requirements.''

Meanwhile, traders are waiting for the Reserve Bank of Australia, Governor Phillip Lowe, will speak. Also, we will have the Aussie jobs data.  A big gain in employment seems inevitable in November, analysts at ANZ bank said.

''Just how big is the question.''

''We expect a rise of 240k but the range of forecasts is wide. The impact on the unemployment rate will depend on how quickly participation picks up compared with employment. Our pick is 5.0%, down from 5.2% in October, but it could go either way.''