Australian Dollar Declines Despite Net Gain in Employment

Talking Points:

• Australian Dollar ended up declining against its major peers on July’s jobs report
• Net gains in employment amounted to 27,900, stronger than the +20,000 forecast
• Details showed that the increase derived from part-time positions as full-time fell

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The Australian Dollar initially struggled to make up its mind on a mixed July employment report. During the first minute after the release, AUD/USD sparked sharply lower and immediately retraced its losses. The currency then ultimately followed through with a dive.

Looking at the numbers, net gains in employment amounted to 27.9k. This was higher than the 20.0k forecast and stronger than the 20.0k increase in June (revised higher from 14.0k). In addition, the unemployment rate fell to 5.6% from 5.7% as the participation rate increased to 65.1% from 65.0%.

What seemed to give the markets brief hesitation before commitment were the details of the employment gains. Australia actually lost 20.3k full-time jobs while gaining 48.2k part-time positions. Perhaps this could have explained why AUD/USD eventually fell despite some rosy readings in the data. Last time, the opposite was the case when full-time position growth outpaced part-time losses.

Looking ahead, an absence of economic data from Australia until next week might leave the sentiment-linked Aussie vulnerable to risk trends. As Senior Currency Strategist Ilya Spivak mentioned, the Australian Dollar still appears to be attractive for yield-seeking investors while the RBA is in no rush to raise rates.