AUD/USD declines as the Australian Dollar maintains its losses in the wake of domestic labour market data. Australia’s unemployment rate decreased to 4.4% from 4.5%, with the economy adding a robust 40.3K jobs in May. The CME FedWatch tool shows that markets are currently assigning an 83.1% likelihood of rate hikes occurring by the end of December. AUD/USD persists in its downward trend for the eighth straight day, hovering near 0.6900 during the Asian session on Thursday. The pair remains subdued as the Australian Dollar holds losses following the release of domestic labour market data.
According to the latest data from the Australian Bureau of Statistics, Australia’s labour market demonstrated robust recovery in May, as evidenced by the Unemployment Rate decreasing to 4.4% from April’s 4.5%. This decline was in complete accordance with market anticipations. The most striking takeaway from the report was the net Employment Change, which saw an influx of 40.3K jobs. This significantly exceeded the consensus expectation of a 25K rise and represented a notable reversal from the 40.7K jobs lost in the prior month. Under the hood, the data reveals that while the overall Participation Rate held steady at 66.7%, the workforce expansion was primarily driven by part-time roles.
Part-Time Employment increased by 35.2K positions, fully offsetting the 19K drop observed in April. Full-Time Employment showed a recovery, increasing by 5.2K jobs after a significant decline of 21.7K in the previous report. The AUD/USD pair shows signs of weakening as the US Dollar may maintain its upward momentum, driven by increasing market expectations for Federal Reserve interest rate hikes later this year. Market participants are adjusting their strategies in anticipation of stricter monetary policy following comments from Federal Reserve Chairman Kevin Warsh, who emphasised a strong commitment to controlling inflation while highlighting the overall stability of the economy.
Reflecting this hawkish shift, the CME FedWatch tool indicates that markets are currently assigning an 83.1% probability to rate hikes by the end of December. Traders are closely monitoring the impending release of the US Personal Consumption Expenditures data later today. The headline inflation is anticipated to rise to 4.1% year-over-year in May, up from April’s 3.8%, while core PCE is expected to increase slightly to 3.4% year-over-year.