Australian dollar jumps after strong jobs report

• Australian job growth beats expectations
• AUD/USD rises

The Australian dollar has climbed on Thursday, courtesy of a strong employment report for June. In the European session, AUD/USD is trading at 0.6812, up 0.63%. This follows a nasty four-day slide, which saw the Aussie lose close to 100 pips.

Australian job growth beats expectations

Australia’s labour market continues to shine. The economy added 32,600 jobs in June, better than the consensus estimate of 15,000 but lower than the stellar May release of 76,600. Full-time jobs increased by 39,300, with part-time jobs declining by 6,700. The unemployment rate was unchanged at 3.5%, just below the consensus of 3.6%.

The employment numbers are excellent but the Reserve Bank of Australia won’t be happy. The RBA, which has abandoned forward guidance and has looked to the data when making rate decisions, will be under more pressure to raise rates at the August 1^st meeting. This will make next week’s inflation report, accompanied by the quarterly inflation outlook, critical as it is the final key release prior to the rate decision.

Inflation has not fallen as fast as the RBA would have liked, despite the central bank raising rates by 400 points in just over a year. In May, inflation fell to 5.6%, down sharply from 6.8%. Inflation is heading in the right direction but remains well above the RBA’s target of 2%.

The money markets reacted to the job numbers by sharply revising the probability of a 0.25% hike in August – from 25% prior to the release to 43% afterward, according to the ASX RBA rate tracker. This is shaping up to be a live meeting and RBA members will likely have a difficult decision on their hands – whether to raise rates or pause for a second straight time.

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AUD/USD Technical

• AUD/USD is testing resistance at 0.6786. Above, there is resistance at 0.6947
• 0.6676 and 0.6515 are providing support