Australian Dollar Retreats After Jobs Report

The Australian dollar weakened to around $0.71, retreating from a ten-week high reached in the previous session as softer labor market data reduced expectations of another RBA rate hike. Employment fell by 15,800 in July, reversing June’s upwardly revised gain of 80,300 and defying forecasts for a 15,000 increase. It marked the first monthly decline since April. Meanwhile, the unemployment rate rose to 4.5%, slightly above both market expectations and June’s 4.4%, reaching its highest level in three months. In its latest forecasts, the RBA projected unemployment would rise to 4.8% by mid-2028 and remain at that level through the second half of the year, above the government's 4.5% forecast. While policymakers continue to view the labor market as relatively tight, recent data suggest employment growth and demand are gradually moderating. The RBA recently held rates steady at its June and August meetings as it assessed the impact of earlier policy tightening on economic activity.

The Australian dollar fell below $0.71, but remained near a ten-week high as investors weighed the Reserve Bank of Australia's latest remarks and soft quarterly wages data. Australian wages rose at a moderate pace for a fifth straight quarter in the June quarter, as annual growth in the private sector slowed to its lowest level in four years. The softer private wage growth could ease some pressure on the RBA to tighten policy, although Deputy Governor Andrew Hauser warned that the central bank may need to raise rates again if upside inflation risks crystallize. He highlighted the Middle East conflict, the global AI boom and weak productivity as key risks to inflation. The RBA kept its cash rate at 4.35% last week after raising rates by 75 basis points since February to contain persistent price pressures. Attention now turns to Thursday’s jobs report, with employment expected to rise by 15,000 in July after a strong 76,300 gain in June, while unemployment is forecast to remain at 4.4%.

The Australian dollar traded above $0.70, near a ten-week high as a broadly weaker US dollar and improving domestic economic sentiment supported the currency. The greenback came under pressure as softer-than-expected US economic data prompted traders to trim the odds for further Federal Reserve rate hikes, raising concerns about US economic growth and the dollar’s yield advantage. The Aussie also drew support from improving domestic sentiment after the Reserve Bank of Australia held its interest rate at 4.35% following three hikes earlier in the year. Australian consumer confidence improved to a nine-month high in August, adding to expectations that the economy remains resilient. Markets are now focused on Thursday’s jobs report, with employment expected to rise by 15,000 in July after a strong 76,300 increase in June, while unemployment is forecast to remain at 4.4%. Quarterly wages data are also due on Wednesday, while RBA Deputy Governor Andrew Hauser will also be speaking.