The Australian labor market enjoyed a strong March: the country gained 18.1K jobs, better than around 7K expected. The unemployment rate dropped to 5.8%, significantly lower than 6.1% predicted.
AUD/USD, which was already on a roll following the US dollar’s weakness, continued higher in the immediate reaction, and a second wave of gains follows.
The details of the report are not that shiny: Australia lost 22.1K full time jobs while it gained 40.2K part time jobs. Also the participation rate ticked down from 64.8% to 64.7%. Nevertheless, the headline drop inflation below the round 6% level is what the Australian dollar needed to rally.
Here is the chart:
Another factor that helped the Australian dollar was a better than expected Chinese trade balance: Australia’s No. 1 trade partner reported a surplus of 7.7 billion after a surprising deficit beforehand.
The good news pushes the Aussie higher, but it could trigger a counter reaction that could come from the RBA. In the not so distant past, the central bank in Australia talked down the A$ quite successfully. While their optimal level of 0.85 is currently very distant, a trigger of another round level at 0.95 could result in speaking out against this strength.
For more, see the AUDUSD forecast.
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