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Australian Dollar Jumps On Job Report Smash, Gains Likely Fragile

Australian Dollar Jumps On Job Report Smash, Gains Likely Fragile

David Cottle, Analyst


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Australian Dollar, Employment Data Talking Points:

  • Australia’s job creation shattered forecasts for August
  • Employment rose by 44,000, much of it full time
  • The Australian Dollar gained but those gains may not last

Join our analysts for live, interactive coverage of all the economic data which move the Australian Dollar at the DailyFX Webinars. We’d love to have your take.

The Australian Dollar rose sharply Thursday in the wake of official employment data whose headlines smashed expectations.

They showed that 44,000 Australians found jobs in August. That was much more than the already pretty-strong 18,000 which markets were looking for. Even better for Australian Dollar bulls, the lion’s share of these (33,700) were in full time positions. Meanwhile 10,200 part-time vacancies were also filled.

This news was cheered understandably by AUD bulls, even though the unemployment rate remained steady at 5.3% and the overall participation rate only edged up, to 65.6% from 65.5% in July.

Gains fading already. Australian Dollar Vs US Dollar, 5-Minute Chart

The Australian economy is not doing at all badly by many counts, of which these data are just the latest. Official growth numbers released last week were very strong too.

However, inflation remains stickily low and consumer debt extremely high. The Reserve Bank of Australia is also worried about the prospect of a US/China trade war given Australia’s close economic and political ties to both main actors. The prospect glowers over all commodity currencies, linked as they are to the global growth cycle.

In short the remorseless hammering AUD/USD has seen for most of this year is most unlikely to reverse anytime soon despite plentiful domestic economic cheer.

Still, on its daily chart AUD/USD has staged a modest bounce from this week’s three-year lows. But the backdrop remains overwhelmingly gloomy with interest-rate differentials squarely in the greenback’s favor and likely to stay that way. Australian rates remain at the record lows they’ve been at since August, 2016 and futures markets don’t fully price even a single, quarter percentage point rise for this year and all of next.

Strategic Downtrend Endures. Australian Dollar Vs US Dollar, Daily Chart

The big question for Australian Dollar investors as we head into year-end will be whether the economic numbers can stay as good as they have been. AUD/USD price actions suggests that the markets’ answer to that question for the moment is ‘no.’


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--- Written by David Cottle, DailyFX Research

Follow David on Twitter @DavidCottleFX or use the Comments section below to get in touch!

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