Aussie slips on soft employment data

• Australian employment falls sharply
• PBOC expected to maintain loan prime rates

The Australian dollar has extended its losses on Thursday. In the North American session, AUD/USD is trading at 0.6312, down 0.37%.

Australia’s labour market had a disappointing September, with only 6,700 jobs created. This was well below the August reading of a revised 63,300 and missed the consensus estimate of  20,000. The unemployment rate dipped to 3.6%, down from 3.7% in August, but only because the workforce participation rate dropped sharply from 67.0% to 66.7%.

The labour market has been surprisingly robust, despite aggressive tightening by the Reserve Bank of Australia. However, a look at the past six months shows a more complicated picture. Employment growth has almost exclusively limited to time positions, with little growth in full-time employment.

The employment report did not move the market pricing for a rate increase at the November meeting, which remains at just 13%, according to the ASX RBA rate tracker. The final piece in the rate decision puzzle will be next week’s inflation report, which could make or break the case for a hike. Inflation to 5.2% y/y in September, up from 4.9% a month earlier.

The RBA remains hawkish about inflation and Governor Bullock said on Wednesday that it would be difficult to push inflation down, with services inflation, low unemployment and rising house costs contributing to “sticky” inflation which was running above the 2% target. Bullock warned that if long-term inflation expectations become entrenched at high levels, the central bank would have to raise rates.

China’s GDP for the third quarter came in at 4.9%, down from Q2 but stronger than expected. On Friday, the PBOC is expected to maintain the one-year and five-year Loan Prime rates at 3.45% and 4.2%, respectively.

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AUD/USD Technical

• AUD/USD has support at 0.6240 and 0.6184
• 0.6343 and 0.6399 are the next resistance lines