• Australian Dollar stalls on the third day of its recovery rally versus the US Dollar.
• Robust US wages keep the inflation flame alive, supporting rate hike probabilities in the US and hence the Buck.
• The Australian Dollar is expected to lose a source of support as China slows down and diversifies its raw material sourcing away from Oz. 

The Australian Dollar (AUD) stalls in its progress higher against the US Dollar (USD) on Monday as USD recovers on slightly higher probabilities that the Federal Reserve (Fed) will hike interest rates in September. 

US labor market data for July was a mixed bag – granted the headline figure showed a slightly lower-than-expected increase in jobs, wages rose more than forecast, possibly prompting a latent upthrust in inflation expectations. 

The CME’s FedWatch tool, a trusted market-based gauge of future Fed rate decisions, puts the chances of the Fed raising interest rates in September at 15.5% on Monday, marginally higher than the 13% registered on Friday. 

Since higher interest rates are positive for sovereign currencies, because they attract more foreign capital inflows, the slightly higher probability of the Fed hiking in September is positive for USD (the opposite for AUD/USD