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Just as confidence in the economy was on the rise, along comes today's jobs report.
Australia shed 5.4K jobs in August, which was a surprise to a market that was positioned for a rise of 22K, meaning it's little wonder that the domestic currency is under pressure.
The Australian Dollar is down against the majority of its major peers, suggesting the market thinks the Reserve Bank of Australia (RBA) will be required to lower interest rates again, or maybe on a couple more occassions.
The GBP/AUD exchange rate rises to 2.0546 in the wake of these data, solidifying support at 2.0342 in the process and opening the door to further upside. EUR/AUD rises to 1.7820, while AUD/USD falls to 0.6637.
The Australian Dollar strengthened through late August and early September as the market came around to the view that a strengthening Australian economy would precipitate a pause in the RBA's rate cutting cycle.
This support from the rate expectations channel was burnished by expectations for a strengthening global economy now that the Federal Reserve is commencing a new rate cutting cycle.
However, the domestic consideration appears to be reasserting its influence over AUD on Thursday as markets ponder these data. The labour market is a key concern for the RBA and it won't want to appear dismissive of any signs of weakening, which should ensure a willingness to cut rates further.
"We continue to expect unemployment to tick higher against a backdrop of a modest short-term softening in participation," says Ryan Wells, an Economist at Westpac.
Westpac thinks the RBA is already alert to a deteriorating jobs market and will respond with a November rate cut, with a further 50bps of easing pencilled in for 2026.
This is slighlty more than the market expects, meaning there's scope for an increase in rate cut bets that would weigh on AUD further.
However, economists at Commonwealth Bank of Australia (CBA) are taking the other side of this bet, and even if risks are titled to the unemployment rate rising further than they expect.
They note that the unemployment rate is a lagging indicator and the economy is now strengthening again. As such, CBA expects the RBA to look through the August data and deliver just one more cash rate cut, compared to market pricing for two more cuts.
This implies that the AUD selloff could be getting a little ahead of itself in the event that the economy throws up some good data in the coming months, allowing the RBA to consider ending the cutting cycle.