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The Australian dollar extended gains after Australia's labour market posted strong full-time job gains and underpinned bets that the RBA will raise rates in May.
The headline from the ABS is that Aus added 17.9k jobs in March, but that was overshadowed by news that 52.5k full-time jobs were added last month (part-time was down 34.6K).
The increase in full-time jobs speaks of confidence and an economy that is relatively well placed to ride out the Iran war.
Sure, confidence has fallen on fuel price surges and shortages emerge, but the market reckons the Reserve Bank of Australia (RBA) will probably have to raise interest rates again in May.
For the Aussie dollar, that's supportive: currencies tend to benefit when their central bank raises interest rates because the underlying economy is hot.
"The market remains fully priced for another 25 bp RBA rate hike on a three-month view, encouraged by another round of firm Australian labour data," says Jane Foley, Senior FX Strategist at Rabobank. "The AUD remains the best performing G10 currency in the year to date."
The pound-Australian dollar exchange rate fell to 1.8890 in the wake of the data, the euro-Aussie to 1.6429 and AUD/USD rose to 0.7197 at one stage, its highest level since 2022.
Andrew Hauser, the RBA Deputy Governor, firmed up bets for a May rate hike when he spoke at the Institute of International Finance Global Outlook Forum in Washington, D.C.
He said Australia "went into the Iran shock already running quite hot, and that created some challenges."
He explained that a major communication challenge for the RBA was communicating to Australians why the central bank might need to raise interest rates even as Australians are hit with higher petrol prices.
Just two days ago he said Australia’s inflation remains too high and interest rates will need to be set at a level consistent with returning it to the 2–3% target, Reserve Bank Deputy Governor Andrew Hauser said.
"For now, the relatively hawkish position of the RBA is keeping the AUD well supported," says Rabobank's Foley.