Australian Dollar Aided By Improved Morale, Employment Figures

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Improved global investor sentiment and an upgrade to February's bumper job report are supporting the Australian Dollar.

The Australian Dollar rose against the U.S. Dollar, Pound and other currencies after Australia reported employment shrank by 6.6K in March, disappointing against expectations for a reading of +7.2K.

But it was the upgrade to February's bumper job growth that saw the Aussie Dollar turn higher in the aftermath of the report. The ABS revised the February print to 117.6K from 116.5K, confirming a robust jobs market that should keep the Reserve Bank of Australia vigilant against calls to cut interest rates.

"The March LFS incorporated somewhat of a ‘pay-back’ from an incredibly strong February, but on balance, it provided a slightly better read on the underlying state of labour market conditions over the opening quarter," says Ryan Wells, an economist at Westpac.

The Pound to Australian Dollar is at 1.9338 following the employment report, while the Aussie Dollar is a quarter per cent higher against the broadly softer U.S. Dollar at 0.6451, with gains coming amidst a more supportive global backdrop.

"AUD/USD experienced some volatility around the release of the Australian labour force data," says Carol Kong, a currency strategist at Commonwealth Bank of Australia.

Investor morale has improved through the middle portion of this week, boosting bonds, stocks and risk-on currencies such as the Australian Dollar.

"Asian markets were making solid gains across the board on Thursday," says Shane Strowmatt, an analyst at LGT Private Banking. "A sense of calm was returning to markets midweek after several sessions dominated by negative sentiment, which was exacerbated by negative geopolitical headlines out of the Middle East."

The Australian Dollar and equity markets have struggled of late as investors have cut back expectations for the number of U.S. interest rate hikes in 2024 to just one, having seen as many as seven at the start of the year. This repricing has run its course for now, offering potential short-term comeback opportunities to stocks and the Aussie Dollar.

"The market has already gone far in its expectations for key interest rates in the US," says Antje Praefcke, FX Analyst at Commerzbank. The analyst says this is by no means a turning point for markets and she expects further gains for the Dollar, albeit at a more gradual pace than we have seen of late.

Any continued rise in the U.S. Dollar would speak of difficult global market conditions that should keep Australian Dollar upside limited.