Australian Dollar sinks on soft employment report, US Retail Sales loom

The Australian dollar is sharply lower on Thursday. In the European session, AUD/USD is trading at 0.6467, down 0.93% on the day. Earlier, the Australian dollar fell as low as 0.6461, its lowest level since June 24.

Australian job growth slides, unemployment jumps

Australia's June employment report was much softer than expected and investors responded by sending the Australian to a three-week low. Job growth showed a marginal gain of two thousand, following a revised -1.1 thousand in May and well off the market estimate of 20 thousand.

Full time employment slid by 38.2 thousand, after a revised gain of 41.9 thousand in May. The unemployment rate, which had held at 4.1% for five consecutive months, jumped to 4.3%, the highest jobless rate since Nov. 2021.

The weak job numbers indicate large cracks in what has been a resilient labor market. This has enabled the Reserve Bank to go slow, with only two cuts in the current easing cycle, which began in February. Today's soft job numbers will put pressure on the Reserve Bank of Australia to lower interest rates at its August rate cut. The markets have raised bets for a quarter-point cut to around 85%, as investors are anticipating that the Bank won't be able to ignore this deterioration in the labor market.

Overshadowed by the employment data, Australia's consumer inflation expectations eased to 4.7% in July, down from 5.0% in June. Inflation has been largely contained, running at 2.4% y/y for three consecutive quarters.

US Retail Sales expected to rebound

After the June inflation report was hotter than expected, the markets will be focused on today's retail sales release. The consensus stands at 0.1% m/m, after a dismal 0.9% decline in May, which was a four-month low as consumers held back on spending due to US tariffs.

AUDUSD technical

• AUD/USD has pushed below several support levels today. AUD/USD is testing support at 0.6467, followed by 0.6439.
• There is resistance at 0.6557 and 0.6585.