TALKING POINTS FOR AUD/USD TRADING:
- Australian Dollar strengthened against US Dollar after positive employment data
- 2-Year bond yields rose, but the RBA may still keep rates at their all-time low
- Sentiment-linked AUD remains vulnerable in the wake of possible US auto tariffs.
The Australian Dollar appreciated against its US counterpart following the release of high-performing local jobs and employment data. The Australian economy added 50.9k jobs, a significant increase from economists’ forecasts of an additional 16.5k jobs and May’s 12.0k jobs. Meanwhile, June’s unemployment rate held in line with prior and estimate reports at 5.4% and the participation rate increased slightly to 65.7% from both prior and estimate values of 65.5%.
The positive economic data may influence the Reserve Bank of Australia’s policy implications, as the uptick in employment data may lead to increased inflation, which we will see next week with the release of second quarter CPI. Two-year bond yields rose to 2.1901 from 2.0769 immediately following the data release, suggesting that the RBA may consider a change in rates quicker than they alluded to in their July meeting minutes. However, overnight index swaps were pricing at a 0.4% probability of rate hike probability at the RBA’s Aug 7 meeting at the time of the data release, not crossing the 50% threshold until their July 2019 meeting.
Looking ahead, the sentiment-linked Aussie dollar could be vulnerable to risk appetite over the next 48 hours due to renewed US-China trade war concerns. The U.S. Commerce Department will be considering possible auto import tariffs during the next two days. In addition, AUD will also be looking towards the release of local second quarter CPI release next week for further movements.