Australian Dollar Boosted by Solid Jobs Data and Weaker USD. Where to for AUD/USD?

Australian Dollar, AUD/USD, US Dollar, Unemployment, US CPI, Fed – Talking Points

• The Australian Dollar nudged higher again after robust jobs numbers
• The US Dollar story continues to dominate after CPI and Fed minutes
• The RBA might be in a battle to rein in inflation with a very tight labour market

The Australian Dollar jumped again after jobs data revealed a persistently tight labour market, something that could keep inflation higher for longer.

The unemployment rate remained low at 3.5% in March against the 3.6% anticipated and 3.5% prior. 53.0k Australian jobs were added in the month, which was notably above the 20k anticipated and 64.6k previously.

Looking at the underlying change in the employment numbers, it is an even stronger data point. Part-time jobs fell by -19.2k but full-time rocketed to 72.2k.

This raises the spectre of what the RBA will do at its meeting next month with the interest rate market not expecting any change. The more accurate quarterly Australian CPI will be released next week and will be the focus of attention.

A reacceleration of price pressures may provide a headache for the central bank.

AUD/USD had been boosted overnight on a weaker greenback after US CPI was a slight miss on estimates. It came in at 5.0% year-on-year to the end of March rather than the 5.1% anticipated and 6.0% previously.

In the same session, the Federal Open Market Committee (FOMC) meeting minutes revealed the bank has eased back from an aggressive hawkish posture at its last conclave.

Elsewhere, cyclone Isla is expected to cross the Western Australian coastline late Thursday or early Friday. Although it is currently not expected to cause any lasting impact on the vast iron ore assets in the Pilbara region, its path will be closely watched.

China’s Deputy Foreign Minister is visiting Australia this week and has been in several meetings with Federal Government officials and business leaders. The language from both camps continues to indicate a desire to move toward a more productive trade relationship.

Since China embargoed several Australian export products, in 2021, many companies reassessed the risk of relying on one large customer. Many have generally pivoted toward a diversified approach in establishing export markets.

The result is that Australia’s trade surplus continues to run at a record rate with the latest figures showing a blistering AUD 13.87 billion for the month of February.

The world’s second-largest economy remains a key market, but the improving diplomacy between the two nations might provide a lift in sentiment rather than a better bottom for the Aussie Dollar in the near term.

With the US Dollar facing headwinds and the resilient fundamental domestic date, AUD/USD might look to test the potential resistance zone in the 0.6785 – 0.6800 area.

AUD/USD PRICE REACTION TO US CPI AND JOBS DATA

Chart created in TradingView

— Written by Daniel McCarthy, Strategist for DailyFX.com

Please contact Daniel via @DanMcCathyFX on Twitter