- AUD/USD drops as Australia’s jobless rate spiked to 7.1% in May.
- The jobless rate rose even as the participation rate declined.
- Australia’s economy shed 227.7K jobs in May, validating RBA’s dovish stance.
The Aussie dollar ran into offers, sending the AUD/USD pair lower from 0.6880 to 0.6850 after Australia reported a bigger-than-expected rise in the jobless rate in May.
The unemployment rate rose to 7.1% versus expectations for 7%, following April’s 6.2%. Moreover, the uptick in the jobless rate wasn’t the result of a rise in the participation rate. That metric fell to 62.9% from 63.5%.
Meanwhile, the economy shed 227.7K jobs in May versus expectations for a 125K decline, having lost 594.3K jobs in the preceding month. More importantly, full-time jobs fell by 89.1K.
All in all, the monthly jobs report poured cold water over the optimism generated by the weekly numbers, which said the labor market stabilized in May. The employment data validates the Reserve Bank of Australia’s view that the policy needs to remain accomodative for some time. The central bank’s recently released minutes showed that the policymakers intend to keep rates at record lows and retain the three-year yield curve control target until progress is made towards the bank’s goals of full employment and the inflation target.
The pair, therefore, could continue to lose altitude during the day ahead. The renewed coronavirus fears will likely add to the bearish tone around the Aussie dollar. While Texas COVID-19 cases rose by 3.4%, above the seven-day average of 2.7% on Wednesday, numbers also took a leap in Florida, Arizona, and Oklahoma. Meanwhile, Beijing undertook strict actions by cutting off the air travels and recalling the lockdowns to tame the deadly disease from spreading.
The risk sentiment, too, has weakened, as evidenced by the 1.3% decline in the S&P 500 futures seen at press time.
Technical levels
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