Aussie hits 4.5 month high on strong job gains

  • Australian dollar powers higher
  • Australian job growth beats expectations
  • Fed’s Powell projects three rate cuts in 2024

The Australian dollar continues to head higher this week. In Thursday’s North American session, AUD/USD is trading at 0.6702, up 0.65%. The Australian dollar is having a superb week and has gained 2%. Earlier today, the Aussie climbed as high as 0.6728, its highest level since July 31st.

Australian employment growth crushes expectations

Australia’s economy added 61,500 jobs in November, blowing past the market consensus of 11,500 and higher than the revised October gain of 42,700. At the same time, the unemployment rate rose from 3.8% to 3.9%, above the market consensus of 3.8% and the highest level since May 2022.

The strong gains in employment growth boosted the Australian dollar and indicated that the labour market remains resilient despite the Reserve Bank of Australia’s steep rate hike cycle. The central bank has said that its rate path will be data-dependent and today’s strong data will provide support for the RBA to maintain a tightening bias. The RBA hasn’t suggested that rate cuts are coming, but the markets have priced in about 50 basis points in easing in 2024.

Fed pivots and jumps on rate cut bandwagon

The Federal Reserve paused at Wednesday’s meeting, keeping the benchmark rate at a target range of 5.25%-5.50% for a third consecutive time. That move was widely expected but Fed Chair Powell surprised the markets with a very dovish performance. There had been expectations that Powell would push back against growing speculation that the Fed would trim rates in 2024. Instead, Powell essentially declared the end of the rate-tightening cycle and signalled that the Fed expected to cut rates three times next year.

Powell’s dovish stance sent equities flying higher and the US dollar tumbling. Powell has repeatedly said that the door remained open to further rate hikes, warning that inflation was too high. Just two weeks ago, Powell said it would be “premature” to speculate about the timing of rate cuts and the shift in policy was dramatic. The Fed may have become more dovish, but there is still a deep disconnect between the markets and the Fed, as the markets have now priced in six rate cuts in 2024, compared to only three for the Federal Reserve.

.

AUD/USD Technical

  • There is resistance at 0.6671 and 0.6763
  • 0.6598 and 0.6506 are providing support

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental and macroeconomic analysis, Kenny Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in major online financial publications including Investing.com, Seeking Alpha and FXStreet. Kenny has been a MarketPulse contributor since 2012.