Aussie falls despite strong job data

The Australian dollar has edged lower in Thursday trade. Currently, AUD/USD is trading at 0.7460, down 0.26% on the day.

Australia employment outperforms

The June employment report was stronger than expected. The economy created 29.1 thousand jobs, ahead of the consensus of 20 thousand. The job gains helped send the unemployment rate to 4.9%, down from 5.1% beforehand. Of particular note was a decline in the monthly hours worked, which is likely due to the lockdowns in place due to Covid.

Covid is on the mind of the markets, as the Aussie is in negative territory despite the strong employment data. The state of Victoria is under a 5-day lockdown, just one month after the previous lockdown. This has soured sentiment towards the Australian dollar.

Health restrictions have also had a significant effect on consumer confidence. The Westpac Consumer Sentiment index rebounded in July, after posting two straight declines. The 1.5% gain was modest, but was still impressive, given that the survey was taken when health restrictions were in effect in the states of New South Wales and Victoria.

Powell stays dovish

Fed Chair Jerome Powell did not shift gears in testimony before the House on Wednesday. Powell acknowledged that inflation has “increased notably”, but insisted that the jump is due mostly to temporary factors, such as shortages of used cars and semiconductors, and that inflation would ease when conditions returned to normal. Powell stressed that the economy would have to substantially improve before the Fed would change policy.

The markets have been looking for indications as to when the Fed will taper its minimum USD 120 billion/mth in bond purchases, but Powell kept his cards close to his chest on that point, saying only that Fed officials are discussing scaling back the pace of bond purchases.

Powell’s message to the markets was that notwithstanding the surge in inflation, the Fed is committed to its dovish monetary policy.

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AUD/USD Technical

• There is support at 0.7400. Below, we find support at 0.7311
• On the upside, there is resistance at 0.7589 and 0.7689

For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-event

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