The AUD/USD pair rose to nearly 0.6730 as the US Dollar weakened amid disputes between the US and the EU over Greenland. During the European trading session, the pair traded 0.25% higher, driven by the US Dollar’s underperformance against its peers.
US Dollar Index Falls
The US Dollar Index, which tracks its value against six major currencies, fell by 0.55% to about 98.50. The “Sell America” trend intensified due to concerns over the strained US-EU alliance, following US President Trump’s 10% tariffs on several EU members and the UK over Greenland-related tensions.
US Treasury Secretary Scott Bessent confirmed that the US won’t leave NATO despite these disputes. Meanwhile, Bessent also mentioned that a new Federal Reserve Chairman could be named soon, with four candidates currently considered.
Market participants kept an eye on Australia’s employment data to assess the Reserve Bank of Australia’s monetary policy outlook. The Australian labour report is expected to indicate the creation of 30K jobs in December, after a prior decrease of 21.3K in November, with the Unemployment Rate potentially rising to 4.4% from 4.3%. The employment data holds implications for consumer spending and economic growth.
The “Sell America trade” is gaining momentum as geopolitical tensions with the EU rise over Greenland and recent tariffs. This has pushed the US Dollar Index down to 98.50, a level that acted as a key support throughout the second half of 2025. A sustained break below this point suggests further weakness for the dollar in the coming weeks.
Focus on Australian Employment Data
For us, the immediate focus is the Australian employment data due this Thursday, which will be a major test for the AUD/USD exchange rate. With consensus looking for a 30,000 job gain to reverse November 2025’s surprise loss, a strong print is needed to justify the Aussie’s recent strength. This jobs report is particularly crucial given last week’s quarterly inflation figure came in hot at 3.1%, putting pressure on the Reserve Bank of Australia.
We believe buying volatility on the AUD/USD is the prudent move ahead of Thursday’s data release. An options strategy like a straddle allows a trader to profit from a large price move in either direction, whether the jobs number beats or misses expectations significantly. This approach hedges against the risk of being on the wrong side of a sharp reversal.
Beyond this week, uncertainty over the next Federal Reserve Chairman will likely keep the US Dollar suppressed. We saw similar market choppiness in 2017 before Jerome Powell’s confirmation, suggesting risk-off sentiment could linger until an announcement is made. This environment favors holding safe-haven currencies like the Swiss Franc, which has been the best performer against the dollar recently.
