AUD: Stronger than expected employment gains
The Aussie dollar is trading on the strong side this morning after a stronger-than-expected August jobs report in Australia. Employment rose 64.9k after July’s negative reading, and the unemployment rate was unchanged at 3.7%. As explained by our economist in this note, the hiring spike was almost entirely related to part-time jobs. Still, some of those jobs will become full-time in the coming months, which can also push wages higher.
We remain reluctant to pencil out another hike by the Reserve Bank from our forecasts, and still narrowly favour one last rate increase to 4.35% by year-end. The new Governor, Michele Bullock, may want to convey the message she is serious about bringing inflation down, and if inflationary pressures show some resilience, she could deliver a final hike at one of the three remaining meetings of 2023.
Markets are pricing in a mere 9bp of tightening to the peak, even after the strong jobs figures, meaning there is ample room for a hawkish repricing and AUD to benefit from it. Still, the USD/US activity data story remains much more important for AUD/USD, and we see the pair being capped below 0.6500 for the remainder of September as the USD remains supported post-Fed.
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