Strong labor market backs the RBA – Commerzbank

The Australian Dollar (AUD) is up slightly this morning in response to another strong employment report out of Australia, Commerzbank’s FX Analyst Volkmar Baur notes.

Australia’s economic problems to set a stage for a weaker Aussie

“After seemingly cooling off at the end of last year, the labor market has been adding jobs at a much faster rate in recent months. In July, another 58.2 thousand new jobs were created, almost three times the average for 2015-2019.”

“The unemployment rate rose slightly, from 4.1% to 4.2%, but this appears to be entirely due to a higher participation rate. A separate survey also showed that consumers’ inflation expectations rose again in August to 4.5%, further away from the central bank’s target.”

“None of this points to an imminent rate cut by the central bank, which should support the AUD this year. Next year, we expect Australia’s economic problems to dominate and hence a weaker Aussie.”