Aussie dollar slips as soft jobs data prompts rethink on RBA outlook
Daily Currency Update
The Australian dollar is taking a breather this morning, slipping back toward 0.6668 against the US dollar after briefly touching an almost three-month high of 0.6686. The pullback comes as traders react to unexpectedly soft Australian employment data, which has shifted market sentiment and sparked a wave of selling pressure on the Aussie.On Thursday, the Australian Bureau of Statistics surprised markets by reporting that the economy lost 21,300 jobs in November. This result sharply contrasts with expectations for a 20,000 job increase, and is a notable reversal from October’s strong hiring figures, when employers added 41,100 new positions. The sudden drop in employment has raised eyebrows among investors and economists, many of whom had anticipated a steadier performance from the labor market heading into the final months of the year.
Despite the decline in jobs, the unemployment rate held steady at 4.3%, slightly better than the forecast of 4.4%. On the surface, this may look like a positive sign, but the steady jobless rate is partly due to an unexpected reduction in the overall labor force, as fewer people were actively looking for work. This decline in participation is what has really unsettled markets. A shrinking labor force often signals underlying concerns about economic confidence—people may be discouraged from job-seeking or holding back due to uncertain conditions.
As a result, traders are beginning to rethink their expectations for the Reserve Bank of Australia (RBA). After months of robust data and sticky inflation, many had assumed the RBA might need to remain firmly hawkish—or even consider additional rate hikes—to keep price pressures under control. But a weakening labor market changes the narrative. If job conditions continue to soften, the central bank may have less urgency to tighten monetary policy further, and could instead take a more patient, wait-and-see approach.
This shift in expectations is weighing on the Australian dollar today, as investors adjust their positions in light of the new data. For now, the AUD/USD remains vulnerable to further short-term moves, especially as global risk sentiment and US dollar strength also play their part. Traders will be watching closely to see whether December’s economic indicators signal a temporary hiccup—or the start of a broader cooling trend in Australia’s job market.
Key Movers
Fresh economic data out of the United States is reinforcing the picture of a cooling labour market, adding to growing expectations that the Federal Reserve will remain on a more accommodative policy path. Newly released figures show that Initial Jobless Claims rose to 236,000 for the week ending December 6, noticeably higher than the 220,000 economists had anticipated and a sharp uptick from the revised 192,000 reported the previous week. This marks one of the more significant weekly increases in recent months and suggests that employers may be slowing hiring activity as economic momentum softens.
The broader trend also points to a gradual loss of steam. The four-week moving average, which helps smooth out weekly volatility, continued to edge higher. Meanwhile, Continuing Claims—a measure of Americans who remain unemployed and continue to receive benefits—held at an elevated 1.838 million. The persistence of higher continuing claims indicates that displaced workers are finding it harder to secure new employment, a sign that the job market may be easing more materially than earlier believed.
These developments fit neatly with the Federal Reserve’s recent assessment that the US labour market is no longer as tight as it was earlier in the year. A softer employment backdrop was one of the key reasons behind the Fed’s decision to reduce interest rates, and the latest data gives policymakers little reason to reconsider that shift. Investors are increasingly confident that more easing could follow if the trend of weakening labour conditions continues.
The shifting economic landscape has also had a clear impact on the US Dollar. The US Dollar Index (DXY) is sliding toward 98.25, marking its lowest level since mid-October. The currency has been pressured by the combination of softer macroeconomic data, declining yields, and the perception that the Fed will remain dovish for longer. Market speculation surrounding the potential successor to Federal Reserve Chair Jerome Powell, whose term expires in May, is adding another layer of uncertainty. Reports suggest that Kevin Hassett, widely viewed as more dovish, could be a leading candidate. If appointed, expectations for a more accommodative policy stance may deepen, exerting additional downward pressure on the USD.
With investors weighing economic cooling and political uncertainty, the dollar remains vulnerable in the near term. Markets will be watching closely to see whether upcoming data confirms the trend of a softer US economy—or hints at stabilization ahead.
Expected Ranges
- AUD/USD: 0.6550 - 0.6750 ▲
- AUD/EUR: 0.5550 - 0.5750 ▲
- GBP/AUD: 1.9970 - 2.0170 ▼
- AUD/NZD: 1.1350 - 1.1550 ▲
- AUD/CAD: 0.9050 - 0.9250 ▼