AUD/USD: Australia’s jobs report just the tonic for RBA policy inaction

Australia’s unemployment rate ticked up to 3.9% in November despite booming jobs growth
The gradual loosening in labour market conditions reduces the risk of wage inflation
AUD/USD has risen to multi-month highs, reflecting little need for the RBA to do anything right now

Booming jobs growth, record labour force participation and a gradual loosening of labour market conditions with the unemployment rate ticking up to 3.9%. For policymakers attempting to deliver a soft economic landing, Australia’s jobs report for November could barely have been better. Despite the uptick in unemployment, AUD/USD has risen to fresh multi-month highs, breaking key downtrend resistance in the process.

A beautiful set of numbers for AUD/USD

Australian employment increased by 61,5000, six time greater than the level expected by economists. 57,000 were full-time roles. Despite the huge jobs beat, labour force participation hit a record 67.2%, seeing the unemployment rate tick up a tenth to 3.9%.

Broader measures of labour market slack such as underemployment and underutilisation rose by a larger amount, lifting by 0.2 and 0.3 percentage points respectively to 6.5% and 10.4% respectively. Given the inverse relationship with wage pressures, the gradual increase points to the diminishing risk of sustained wages and higher inflationary pressures.

RBA can sit back and relax over summer

For the RBA, this is a beautiful set of numbers, showing the kind of supply-side dynamics that will make policymakers feel comfortable there’s little need to increase interest rates further. Continued strength in hiring also reduces the need for the bank to signal impending rate cuts, as revealed by the Federal Reserve on Wednesday.

AUD/USD hits multi-month highs

Given the domestic considerations, on top of the unwind in the US dollar on the back of narrowing yield differentials, it’s not surprising to see AUD/USD multi-month highs on the back of the jobs report.

It’s now convincingly broken the downtrend it’s been stuck in since early 2022, paving the way for a test of resistance at .6720. A break there would bring the double-top around .6900 into play. RSI is not overbought on the daily and MACD has crossed over from below above 0, signalling building upward momentum.

For further upside from these levels, it would likely take other major Asian FX names to break to new highs against the USD, such as JPY and CNH. With around six rate cuts priced into the US Fed funds rate curve for next year, there may also be vulnerabilities to data questioning the need for easing of that magnitude.

-- Written by David Scutt

Follow David on Twitter @scutty

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the market you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.