• Australian Dollar pierces new lows after the release of strong US labor data for July. 
• ADP Employment Change rises by 324K, easily beating the 189K estimate. 
• The data follows a run of weakness for the Aussie after a sour market mood turned investors risk averse. 

The Australian Dollar (AUD) reaches new two-month lows against the US Dollar (USD) on Wednesday, after the release of US private payrolls data shows a larger-than-expected expansion of the workforce in July. 

Data from the US’s largest payroll processor ADP, showed an unexpected rise of 324K jobs in July versus the 189K predicted. The data reinforces the view that the US labor market is rock solid and inflation is likely to remain stubbornly high. The Federal Reserve is more likely to maintain interest rates higher for longer if more people are earning, and higher interest rates are positive for the US Dollar as they attract greater foreign capital inflows. 

Australia’s largest export Iron Ore is also in decline, further hitting the Australian Dollar, with Chinese Iron Ore Futures reaching a new low for July in the $108s. 

AUD/USD trades in the 0.65s as the US session gets underway.  

Australian Dollar news and market movers 

• The Australian Dollar loses ground against the USD after ADP payroll data shows a greater-than-expected rise in new employees in July. 
• US private sector added 324K new workers in July when only a 189K increase had been forecast by economists, although the figure was still below the 497K in June. 
• A risk-off mood permeated markets on Tuesday, weighing on the Australian Dollar after weaker-than-expected US ISM Manufacturing PMIs for July and JOLTS Job Openings in June weighed on animal spirits. 
• The market mood was not helped by data from China, showing business activity in the manufacturing sector fell into contractionary territory in July, with the Caixin Manufacturing PMI falling to 49.2 in July from 50.5 in June. 
• The Australian Dollar was already on a weak footing after the RBA left the policy rate unchanged at 4.1% on Tuesday morning, against the market expectation for a 25 basis points hike. In the policy statement, the RBA explained that the decision to hold rates unchanged would provide them more time to assess the impact of policy tightening to date and the economic outlook. 
• That said, they did not completely rule out the possibility of more rate hikes in the future, "Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will depend upon the data and the evolving assessment of risks," the RBA noted.