- A surprise drop in Australia’s jobless rate is pushing the AUD higher.
- The gains, however, could be short-lived, as the quality of the jobs deteriorated in February.
The bid tone around the Aussie dollar strengthened, pushing the AUD/USD to a three-week high of 0.7162 as the official data released soon before press time showed Australia’s jobless rate fell to a fresh seven-year low of 4.9 percent in February. The unemployment rate was expected to hold steady at 5 percent.
The drop in the jobless rate, however, is accompanied by a decline in the labor force participation rate to 65.6 percent from the previous month’s print of 65.7 percent.
Further, the economy added just 4.6k jobs in February compared to 39.1K additions in January, according to the Australian Bureau of Statistics. Notably, the actual figure missed the consensus estimate of 14K by a wide margin.
Full-time jobs dropped 7.3K, having surged 65.4K in January, while part-time jobs rose 11.9K, having dropped 26.3K in the previous months.
All-in-all, the data indicates that the labor market weakened in February. Therefore, the probability of a 25 basis point rate cut by August, which was seen at 64 percent yesterday, could rise even further. After all, the RBA is banking on the labor market to cushion the impact of a slowdown in the property market.
The AUD, therefore, may have a tough time holding on to gains seen at press time. That said, the pullback could find the support of the 5-day moving average (MA) of 0.7109, as the American dollar is on the defensive, courtesy of the dovish Fed.