Australian Dollar yawns after strong employment gains

The Australian dollar is lower on Thursday. In the European session, AUD/USD is trading at 0.6492, down 0.27%.

Australian employment jumps

Australian employment was hotter than expected in October, as the economy created 55,000 jobs. This blew past the market consensus of 20,000 and was much higher than the modest September gain of 7,800. The unemployment rate rose to 3.7% as expected, up from 3.6%, and the participation rate inched higher to 67%, up from 66.8%.

The employment report was positive but is unlikely to have much impact on the central bank’s rate policy. The sharp gain in jobs was mostly in part-time positions, with the October 14th referendum responsible for many temporary positions. The markets shrugged off the data and the Australian dollar gave up ground before recovering.

The markets have fully priced in a pause at the December meeting after the Reserve Bank of Australia raised rates earlier this month to 4.35%. A rate hike in February 2024 is possible, but that decision will depend on the data, particularly the fourth-quarter inflation report in January.

Australian wage growth climbed 1.3% q/q in the third quarter, matching the consensus estimate and above an upwardly revised 0.9% gain in Q2. This was the highest gain since records started in 1997, but the spike was largely due to an increase in minimum wage and a pay rise for elderly care workers. As with the employment release, the sharp increase in wage growth was largely ignored by the markets and had little impact on the Australian dollar.

In the US, retail sales fell 0.1% in October, better than the market consensus of -0.3% but well below the September revised reading of 0.9%. This snapped a six-month streak of gains and is another sign that elevated rates continue to cool the economy.

AUD/USD technical

• AUD/USD tested support at 0.6476 earlier. Below, there is support at 0.6408.

• 0.6526 and 0.6592 are the next resistance lines.