December 5,2022 1:03 AM ET
By:AnalysisWatch
The AUD/USD pair posted a sharp recovery in Tokyo trading after a corrective move below 0.6780. The Australian dollar accelerated to the vicinity of 0.6820 and is expected to extend its gains towards the previous week's high around 0.6845 amid the risk-off profile.
Meanwhile, the U.S. Dollar Index (DXY) is trending sideways, marginally above Friday's low of 104.40, as positive market sentiment has reduced the safe-haven appeal. Positive U.S. non-farm payrolls (NFP) data failed to boost the U.S. dollar. In November, the U.S. economy posted a gain of 263,000 jobs from the previous report of 200,000, and the labor cost index also improved to 5.1% on an annualized basis.
A solid labor market and rising wages point to a further increase in inflationary pressures as households have more money to spend. This could boost demand for perishable and durable goods and keep price growth active.
On the antipodean front, investors are waiting for the Reserve Bank of Australia's (RBA) interest rate decision, which will be announced on Tuesday. UOB Group economists said, "We expect another 25 basis point hike at the final monetary policy meeting of the year on December 6, which would take the policy rate to 3.10%."
It is worth noting that this could be the third consecutive 25-basis-point rate hike by RBA Governor Philip Lowe. The monthly Consumer Price Index (CPI) fell to 6.9% in October from the previously published 7.3%. Still, the inflation rate is well below the targeted rate of 2%, which calls for continued monetary tightening.
Investors will also keep an eye on the Caixin Service PMI data. The economic data is estimated to be slightly higher at 48.8 compared to the previous release of 48.4.