AUD/USD tumbles again as jobs market softens
The Australian dollar has been hammered as the nation’s unemployment rate rose sharply in July, sending the AUD/USD spiraling to levels not seen since November last year. Job market strength was one of the last remaining pillars allowing markets to flirt with the idea of the next move in the RBA cash rate being higher. That now looks dead in the water given weakness across a growing number of domestic economic indicators, especially with the turmoil in China’s economy.
Jobs report diminishes RBA rate hike risk
Australia’s ABS reported unemployment rose to 3.7%, a tenth higher than forecast and above the 3.5% rate of June. Employment slumped by 14,600, far below market expectations for an increase of 15,000. Nearly 25,000 full-time job losses were recorded, offset partially by a smaller increase in the part-time workforce. The estimated participation rate declined by a tenth to 66.7%, helping to prevent an even larger increase in the headline unemployment rate.
The underutilisation rate – a broader measure of excess capacity in the labour market that includes underemployed and unemployed workers – rose two tenths to 10.1% to the highest level since March 2022. That’s important as this measure has a decent inverse correlation to wage pressures. Historically, the higher underutilisation, the lower wage pressures have been. Today’s result further diminishes the risk of a wage price spiral forming.
AUD/USD slides to fresh lows
Already under pressure from a continued rise in global bond yields and turbulence in Asian equities, the AUD/USD reacted violently to the report, falling more than 0.9% at one point to tag a low of .6363. It has subsequently bounced off those lows, helped by renewed intervention from China’s central bank to combat weakness in the Chinese yuan.
Zooming out, sellers may return on pops towards .6380 and again at .6460. There’s little key support on the downside looking at the daily chart until we get to October lows. Some bids may be found around .6350 and again at .6280
The ASX 200 and Australian 3-year government bond futures attempted to rebound following the jobs report but the moves were reversed quickly, indicating global factors remain the dominant influence on Australia markets.
-- Written by David Scutt
Follow David on Twitter @scutty
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