Dollar gains pause ahead of jobs data, Aussie falls on RBA outlook

TOKYO (Reuters) – The dollar hovered near a three-month high on Wednesday, ahead of a big week for macroeconomic data that could shed light on the path of U.S. monetary policy.

Some stickiness in inflation suggests the Reserve Bank of Australia is unlikely to cut interest rates this year, with the Australian dollar inching closer to three-month lows.

U.S. indicators were mixed overnight, showing an easy U.S. job market but strong consumer confidence, leaving little clarity on the outlook for the Federal Reserve’s easing policy, sending the dollar lower along with U.S. Treasury yields after Tuesday’s strong seven-year Treasury auction.

However, recent economic data has shown a resilient economy, especially on the employment front, prompting people to scale back bets on the pace of rate cuts. The ADP employment report is due later in the day, ahead of Friday’s potentially crucial monthly non-farm payrolls report.

“The dollar continues to find strong support as markets adjust expectations for the path of interest rates,” said James Kniveton, senior corporate FX trader at Convera.

“The U.S. economy is firing on all cylinders right now.”

Meanwhile, in Australia, “rising services sector inflation may mean that a rate cut this year is very remote,” Knifton said.

The Reserve Bank of Australia’s preferred measure of inflation, the adjusted average, slowed to 3.5% from 4.0% in the third quarter, but services inflation remained high. On a quarterly basis, the index rose 0.8%, beating expectations for a 0.7% gain.

The Australian dollar was little changed at $0.6562 by 0101 GMT, not far from Tuesday’s low of $0.6545, a level last seen on August 8.

The U.S. dollar index, which measures the greenback against six major currencies including the yen and the euro, was little changed at 104.24, having hit its highest since July 30 at 104.63 on Tuesday, but ended almost unchanged.

The 10-year Treasury yield fell to 4.2461% on Wednesday, after hitting 4.3390%, the highest since July 5, in the previous session.

The dollar and U.S. bond yields have also been boosted in recent days as speculation by markets and some betting sites about Republican presidential candidate Donald Trump’s victory on Nov. 5 has also been boosted by Trump’s Tariffs and immigration policies are seen as inflationary.

It also helped leading cryptocurrency Bitcoin surge to an all-time high of $73,803.25 since March. The coin last changed hands at around $72,082, having hit a high of $73,609.88 in the previous session.

Opinion polls still show a close race.

USD/JPY, which tends to closely track U.S. Treasury yields, retreated from a three-month high of 153.87 on Tuesday, falling 0.06% to 153.27.

The yen has also been weighed down by political uncertainty as Japan’s ruling coalition lost its parliamentary majority in a disastrous weekend election, ushering in a period of bargaining that could lead to higher fiscal spending and potentially delay interest rate hikes.

The euro edged up 0.06% to $1.0824 ahead of the release of gross domestic product (GDP) data across Europe later in the day, which could reveal whether the European Central Bank will choose to cut interest rates by 25 or 50 basis points at its next meeting in December .

Sterling was flat at $1.3016 ahead of the Labor government’s first budget on Wednesday.

Finance minister Rachel Reeves and Prime Minister Keir Starmer reiterated the need for tough fiscal measures to help plug holes in Britain’s public finances. They are seeking to maintain investor confidence two years after then-Prime Minister Liz Truss’s tax cuts sparked a bond market crisis.

Key to the pound will be estimates from the Office for Budget Responsibility, whose forecasts underpin the government’s spending and tax plans.

(Reporting by Kevin Buckland; Editing by Sonali Paul)