Image © Adobe Images
The Australian dollar is down by more than a percent against the pound this week.
The Australian dollar came under further pressure Thursday after markets pared bets that the Reserve Bank of Australia (RBA) would raise interest rates again this year following the release of domestic jobs data.
Employment fell by 18,600 said the ABS Thursday - which was a significant surprise given the market thought 16.7K jobs would be added - and the unemployment rate increased to its highest rate since November 2021 at 4.5%.
"AUD/USD briefly dropped by 0.8% to near 0.71 after the weaker than expected Australian labour force survey," says Carol Kong, FX strategist at Commonwealth Bank of Australia.
The pound to Australian dollar exchange rate extended the week's gain to 1.17%, trading at 1.8853.
"Our Australian economics team note it is too early to tell how much of the rise in the unemployment rate reflects noise or a more fundamental shift in underlying momentum, but the data is a reminder that conditions are no longer tightening," says Kong.
Interest rate futures markets pricing shows investors are now anticipating 26bp of hikes by the Reserve Bank of Australia by year‑end, down from 35bp prior to the data.
Should that figure reduce further, the AUD could come under further pressure.
"Australia’s labour market loosened in April, with the unemployment rate reaching a multi-year high. The RBA is likely to take comfort from a continued softening of activity indicators near-term," says Nicholas Chia, FX analyst at Standard Chartered. "We maintain our view that the RBA cash rate has peaked at 4.35%, and see a high bar for further hikes."
Improvements in market sentiment will nevertheless likely limit the Aussie dollar's downside as hopes for the end of the Middle East war are joined with ongoing strong corporate earnings.
Nvidia, the pinnacle of the AI trade, overnight reported another steady beat and raise, helping extend the week's recovery in the major U.S. share markets.
That helps the high-beat Aussie dollar.
President Donald Trump meanwhile indicated the war with Iran is coming to an end shortly, fuelling hopes the Strait of Hormuz would reopen. That would ease the premium Asian and Australian households and businesses pay for their fuel relative to the rest of the world, given the region is particularly dependent on Middle Eastern oil.