The Australian dollar broadly declined early Thursday, despite December’s employment report coming in stronger than expected.
Data from the Australian Bureau of Statistics showed Australia’s labor market adding 56,300 jobs in December, significantly outpacing forecasts of a 15,000 increase.
At the same time, the unemployment rate inched up from 3.9% to 4.0% as more people entered the workforce.
Link to ABS December 2024 Employment Report
Here are key points from December’s employment report:
- Total employment increased by 56.3K, far above the 15K forecast
- The unemployment rate rose to 4.0% from 3.9% in November
- Full-time employment decreased by 23,700 to 10,037,600 people
- Part-time employment increased by 80,000 to 4,546,800 people
- Participation rate increased to 67.1%
Turned out, strong labor demand is being balanced by an expanding workforce, partly due to migration, which appears to be easing wage pressures and curbing inflation risks.
As a result, markets are still pricing in a 70% chance that the Reserve Bank of Australia (RBA) will lower its 4.35% cash rate by 25 basis points at its February 18 meeting.
Overlay of AUD Pairs vs. Major Currencies Chart by TradingView
The Australian dollar, which had been giving back some of its gains from the late U.S./early Asian trading session, initially popped higher at the better-than-expected job reports.
But AUD demand soon waned, possibly as traders focused on the underlying labor market softness hinted by the uptick in the unemployment rate and a shift from full-time to part-time job additions.
An expanding workforce, driven by higher participation rates and migration, is also easing wage pressures despite strong hiring figures. This is likely why traders still see the RBA cutting rates as soon as February, and why AUD soon turned lower against its major counterparts.
As of writing, AUD is seeing its biggest losses against safe havens JPY, USD, and CHF while seeing limited weaknesses against “risk” assets like NZD, GBP, and CAD.
