The AUD/USD pair experienced a significant decline, falling to approximately 0.6300, subsequent to the United States Nonfarm Payrolls (NFP) report exceeding expectations. The Australian asset entered an adverse trend as market sentiment shifted towards caution in anticipation of an additional interest rate hike by the Federal Reserve (Fed).

The S&P500 opened on a bearish note following September's optimistic employment data from the United States. New payrolls for the US labour force totaled 336K, which was significantly higher than the previous release of 227K and estimates of 170K. The nominally higher unemployment rate of 3.8% maintains its stability, surpassing expectations of 3.7%. Despite a 0.2% increase, the monthly wage rate fell short of expectations of a 0.3% increase. The annualised wage rate decreased from 4.3% in the previous release and estimates to 4.2%.

The US Dollar Index (DXY), meanwhile, surges to near 106.80 due to the increased probability of another rate rise by the Federal Reserve. The likelihood of interest rates remaining unchanged at 5.25–5.50% has decreased from 81% to 70%, as indicated by the CME Fedwatch tool, subsequent to the publication of the NFP data. Additionally, the probability that the Fed will raise interest rates to 5.50–5.75% by the end of the year is 39%, according to transactions.

Loretta Mester, president of the Cleveland Fed Bank, stated unequivocally this week that the Federal Reserve will continue to raise interest rates. Fed Mester stated that an additional increase in interest rates is essential this year, and that they should persist at elevated levels for an extended duration. Anticipated duration of elevated interest rates until the central bank completes its assessment of the effects of policy tightening.

Concerning Australia, the Australian Dollar continued to be under pressure as the Reserve Bank of Australia (RBA) maintained interest rates at 4.1%, as market participants had anticipated. Monetary policy remained unchanged for the fourth consecutive month at the RBA.

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