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Australian Dollar Declines as Jobs Data Fuels RBA Rate Cut Bets

Australian Dollar Declines as Jobs Data Fuels RBA Rate Cut Bets

Talking Points:

  • Australian Dollar fell more than 0.8% versus the US Dollar after jobs data
  • Government bond yields decline as data fuels RBA rate cut speculation
  • Australian Bureau Statistics uncover a net decrease in employment

The Australian Dollar fell more than 0.8 percent versus its US counterpart after July’s employment data crossed the wires. Economists were expecting the country to add 10K jobs in month of July; actual figures topped estimates at 38.5K jobs added. Most of the jobs gained came from the part-time figures (+26.1K). Australia gained12.4K full-time jobs in July. In addition, the unemployment rate increased to 6.3 percent from 6.1 percent in June. The increase in unemployment was likely a cause of the participation rate increasing to 65.1 percent in July from 64.8 percent in June.

This past Tuesday, the Reserve Bank of Australia left rates unchanged and maintained a neutral monetary policy tone that is dependent on incoming. While the country added more than 38,000 jobs in July, most of the jobs gained came from the part-time sector. Full-time jobs did yield a positive gain, but not as much compared to the 24.9K added in June. In addition, the unemployment rate missed expectations, climbing to a 6-month high, as the participation rate increased to its highest level since April 2013. Simultaneously, Australian front-end and 10-year government bond yields declined in the aftermath of the data release. This suggests that today’s data likely fueled RBA rate cut expectations in the near-term.

According to the Australian Bureau of Statistics, between June and July 2015 gross flows uncovered a 27,300 decrease in the number of people employed. 222,400 people had their status changed from employed to not in the labor force. 202,900 people had their status changed from not in the labor force to being employed. In other words, more people left the job market than those who rejoined it. The 38,500 jobs gained in Australia masked the 27,300 decrease in gross flows. This is likely what fueled RBA rate cut speculation as government bond yields fell alongside the Aussie’s decline.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.