Australian Dollar Gains Sharply As Job Creation Smashes Forecasts

Australian Dollar, Labor Market Data Talking Points:

• Overall job gains were well ahead of forecasts last month

• Full-time positions also rose ahead of consensus

• Given RBA focus on this data it seems likely that aggressive rate-cut forecasts could be pared

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The Australian Dollar rose Thursday on news that its homelands formidable job-creation machine continues to fire.

Overall job creation was an impressive 41,000 in July according to official data, well above the 14,000 new posts which the market has expected. Full-time employment rose by a chunky 34,500 with part time positions up by 6,700. The unemployment rate remained steady at 5.2%, however.

The Reserve Bank of Australia is known to be watching this series especially closely now with monetary policy settings in mind, and this clear evidence that Australia is still hiring is likely to see some of the more aggressive forecasts for lower interest rates pared back a little.

AUDUSD certainly made gains on the release, powering up to a new session high.

On its daily chart the Australian Dollar is still close to the eleven-year low hit on August 7 against its big US brother. A mix negatives continues to hit the currency. General risk aversion and worries about global growth create obviousproblems for the pro-cyclical Aussie. Then there was the Reserve Bank of New Zealands surprise chunky half-percentage-point interest rate cut earlier this month. It saw investors price in similarly-sized reductions in Australia, when before only a single further reduction was expected.

Given this its no wonder that the Aussie should be under pressure.

Signs that Washington and Beijing are making some progress on trade would be the key risk appetite spur about now, but they dont seem likely in the near term, with Chinse officials reportedly pessimistic about the chance of progress when they head to the US next month.

Moreover, for as long as the Aussie is perceived to suffer from such a complete lack of domestic monetary support it will be very hard to get bullish on it for long.

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