The Australian dollar edged lower following today’s Australian employment report but has reversed directions. In the European session, AUD/USD is trading at 0.6957, up 0.28%.
Australian employment report disappoints
Australia released the July employment report, and the numbers were surprisingly soft. The economy lost 40.9 thousand jobs, well below the estimate of 25.0 thousand. This follows a strong gain of 88.4 thousand in May. Making the report sting even more, full-time positions fell by 86.9 thousand. The silver lining was a drop in the unemployment rate to 3.4%, down from 3.5%. However, that was likely due to the participation rate falling to 66.4%, down from 66.8%. The Australian dollar lost ground following the job report release but has reversed directions.
The Aussie tumbled 1.23% on Tuesday, as ominous developments in China are weighing on the currency. The latest news was the Chinese central bank lowering its 1-year MLF loans to 2.75%, down from 2.85%. The spike in Covid cases and the worsening property crisis have resulted in a decline in credit growth, and the PBOC has loosened policy in an effort to boost credit demand. The Aussie is sensitive to developments in China, which is Australia’s number one trading partner.
The RBA meets next on September 6th and another rate hike is likely, even with the weak job report. The markets have priced in a 25 basis point hike, which would bring the cash rate to 2.10%. The RBA minutes, published on Tuesday, indicated that further rate hikes were coming, but reiterated that the Bank would be guided by economic data and the inflation forecast.