Australian Labor Market Disappoints, AUD/USD Lower
- AUD/USD falls as Australian jobs report disappoints, unemployment at 4-year low
- A sluggish domestic economy could revitalize investor expectations for RBA rate cuts
- Recall RBA statement on previous rate cuts, need time to work through economy; strong Aussie reversal may be limited
The Aussie traded lower against the US Dollar as a disappointing labor report came across the wires. The Australian economy lost 10,800 jobs in August, missing expectations for an increase of 10,000. Part-time employment led the decline with 8,200 jobs lost while full-time positions saw 2,600 disappear. July’s labor statistics were also revised lower, contributing to a tick higher in the unemployment rate from 5.7 to 5.8 percent. This is the worst reading since August 2009. Furthermore, the participation rate fell to the lowest level since 2006 at 65.0 percent and likely reflects deteriorating optimism in the workforce.
This report contrasts recent data hinting at higher regional growth and could present a daunting challenge for the Australian economy. As such, sluggish growth could revitalize investor expectations for the Reserve Bank of Australia to reduce rates. Lower yields could reduce the Aussie’s appeal for yield-seeking traders and move AUD/USD lower. However, the RBA has maintained that time will be required for its previous rate cuts to work through the economy. So, a strong reversal for the Aussie will likely depend on future data to help confirm and guide investor expectations.
AUD/USD (5-Minute Chart)
Source: FXCM Marketscope
Jimmy Yang, DailyFX Research Team
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.