Outperforming Australian Dollar, Strong Jobs Data, Weighs on GBP/AUD

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The Australian Dollar rose against all major currencies on Wednesday, weighing on GBP/AUD along the way, after local labour market figures surprised on the strong side of expectations for July.

Australia’s dollar was lifted after the statistical office said employment rose by 58.2k in July, which was far ahead of the consensus for a 20k increase and marks a second consecutive large increase.

Employment gains were concentrated in the full-time category where headcount rose 60.5k before being partially offset by a 2.3k decline in the number of part-time jobs.

The unemployment rate edged higher to 4.1%, however, and some local economists say this should be the more important indicator of the Australian labour force for markets and the central bank.

“Our Australian economics team believes the unemployment rate is the key metric to watch for the monetary policy outlook,” said Carol Kong, an economist and currency strategist at Commonwealth Bank of Australia.

Above: Pound to Australian dollar rate shown at hourly intervals alongside AUD/USD.

“As such, they maintain their base case for the RBA to start its easing cycle in November. Though they note the risk continues to build for a 2025 start date to the easing cycle,” Kong added.

The data delivered a boost to sentiment toward the Australian Dollar but did little to change the outlook for interest rates at the Reserve Bank of Australia, which is squarely focused on inflation at present.

The central bank has prioritised keeping the Australian economy and labour market on an even keel as it seeks to bring inflation back to the 2.5% midpoint of the two-to-three percent target using its interest rate.

Last time out in August the bank said it has been surprised by the persistence of inflation at an above-target level but nonetheless elected to leave the cash rate unchanged at 4.35% for this month.

“Overall, we view today’s data as strong and expect the RBA to form a similar conclusion,” said Adam Boyton, an economist at ANZ Research.

“The robustness evident in jobs growth is at odds with market pricing for a 2024 rate cut in Australia. We expect the first RBA cut in February 2025,” he added.

Above: Pound to Australian Dollar rate shown at daily intervals with Fibonacci retracements of 2024 uptrend and selected moving averages indicating possible areas of technical support.