The Australian Dollar fell immediately after a weak employment report before recovering as broader US Dollar softness limited the damage to AUD/USD.
The Australian Dollar came under pressure after Australia’s July labour-market report showed an unexpected fall in employment and unemployment at its highest level in almost five years.
Employment dropped by 15,800 against expectations for a gain of around 15,000, while the unemployment rate rose to 4.5%.
The Australian Dollar to US Dollar (AUD/USD) exchange rate fell towards 0.7111 immediately after the release before recovering to around 0.7126 later in the morning.
At that later level, the pair was marginally higher on the day, underlining the importance of distinguishing the initial Australian data reaction from subsequent US Dollar weakness.
Jobs Data Eases Pressure on RBA
Full-time employment still increased by 16,300, but participation slipped to 66.9% and total hours worked fell 0.6%.
The softer headline reduces pressure on the Reserve Bank of Australia to tighten policy again quickly.
Westpac economist Ryan Wells had already highlighted “the rising trend in unemployment and underemployment” as evidence that labour-market slack was building.
Oxford Economics Australia chief economist Ben Udy said the July figures were slightly weaker than the RBA had expected and, alongside slower wage growth, reduced near-term pressure for another increase.
Markets remain divided over whether the RBA will need another increase later this year, particularly with inflation still uncomfortable.
For the AUD/USD exchange rate, the immediate support zone sits around 0.7100, while the August high near 0.7129 is the first upside test.
A renewed break below 0.7100 would suggest the labour-market disappointment is beginning to dominate the broader Dollar story.
Our currency coverage draws on live market data, official economic releases and published bank research.
