Australian Dollar: Labor data underpins RBA hike view – BBH

Brown Brothers Harriman’s (BBH) Elias Haddad observes AUD/USD trading near its 200-day moving average support as broad Dollar strength weighs on the pair. Australia’s August labor force report, with stronger-than-expected job gains and higher participation, reinforces expectations for a 25 basis point Reserve Bank of Australia (RBA) hike to 4.60% next week. Haddad sees further RBA tightening and commodity exposure as supportive for the Australian Dollar.

Jobs data backs RBA tightening

"AUD/USD is down near support at its 200-day moving average at 0.7022 on broad USD strength. Australia’s August labor force report reinforced the case for a 25bps RBA hike to 4.60% next week (90% priced-in)."

"The economy added more jobs than expected (actual: +39.5k, consensus: +20k, prior: -15.9k) driven by part-time employment (+45.8k vs. -30.8k in July)."

"The unemployment rate unexpectedly rose 0.1ppt to 4.6%, which was above consensus and RBA year-end projection of 4.5%. However, the increase in the jobless rate largely reflects a higher participation rate suggesting some tightness in the labor market persists."

"Bottom line: rising odds of additional RBA hikes limits policy divergence with the Fed and supports AUD/USD. Additionally, Australia’s strategic exposure to commodities linked to energy, AI, and defense remains an important long-term tailwind for AUD."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)