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Talking Point:

  • The Australia Employment Change came in at -22.6K vs. 10.0K Expected, 15.4% November
  • The Aussie tumbled as investorsreviveconcerns offurther RBA rate cuts
  • World Bank downgrades China growth outlook earlier, adding further fundamental pressure

AUD/USDsank to a fresh three-year low after the December Australia employment report showed a hefty 22,600decrease in net payrolls for– a substantial miss compared to the 10,000net increase expected and 15,400 increase recorded in November. The Aussie dollar slumped as much as 85 pips to 0.8806 in the minutes following the release. Similar price action was observed in other crosses, with AUD/JPY sliding 76-pips to 92.26 and EUR/AUDsurging156 pips to 1.5435.

The worse-than-expected Jobs data raises concern of a slowdown in Australian economic growth, which could in turn encourage the RBA to further cut rates. Meanwhile, the World Bank’s downgrade of China’s 2014-2015 growth outlook on Wednesday would add further pain to the Australian dollar’s fundamental outlook. China is Australia’s top export market, so an economic downgrade hurts Australia’s growth potential as the foundation for the country’s impressive performance through the Great Financial Crisis cools.

From here, the market will shift its focusback to thedollar as the docket offers up U.S. consumer price inflation, initial jobless claims and manufacturing activity in Philadelphia. Later in the day, Federal Reserve Chairman Ben Bernanke isscheduled to speak at an event in Washington.

Data at a Glance

- Australia Employment Change: -22.6K vs. 10.0K Expected, from 15.4K Prior. (Revised lower from 21.0K)

- Australia Unemployment Rate: 5.8% vs. 5.8% Expected, from 5.8% Prior.

- Australia Full-time Employment Change: -31.6K in December, from 10.5K in November. (Revised lower from 15.5K)

- Australia Part-time Employment Change: 9.0K in December, from 4.9K in November. (Revised lower from 5.5K)

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Aussie_Sinks_After_Disappointing_Australia_Job_Data_body_aussie_employment_change.png, Aussie Sinks After Disappointing Australian Job DataAussie_Sinks_After_Disappointing_Australia_Job_Data_body_aussie_unemployment_rate.png, Aussie Sinks After Disappointing Australian Job Data

Chart created by Cheng Li using Bloomberg

AUD/USD 5-minute Chart: January 16, 2014

Aussie_Sinks_After_Disappointing_Australia_Job_Data_body_aussie_job_data.png, Aussie Sinks After Disappointing Australian Job Data

Chart created by Cheng Li using Marketscope 2.0

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-- Written by Cheng Li, DailyFX Researcher. Feedback can be sent to instructor@dailyfx.com