Australia’s domestic environment has been busy with significant changes as well. It’s been these dynamics that are driving the AUDUSD performance. Contrary to expectations of a 22,000 jobs increase, total employment in Australia dropped by 5,400 jobs in August. This remarkable decline was largely due to a large drop in full-time employment which fell by 40,900 in that same month. Despite this disappointment, the unemployment rate remained unchanged at 4.2%, a sign of continued strength in the labor market.
The Monthly Consumer Price Index (CPI)—published by the Australian Bureau of Statistics (ABS)—rose last month. It surged to 3.0% y/y, accelerating from July’s report of 2.8%. This increase in inflation is a normal part of the current economic pressures and is well within acceptable bounds. The underlying measure of CPI, that stripped out the more volatile food and energy, surged to 3.4% YoY indicating stickier inflation.
More clues about the health of Australia’s economy were uncovered in today’s release of second quarter Gross Domestic Product (GDP) data. GDP expanded by 0.6% q/q, beating a consensus forecast for a 0.5% increase. This growth represents an impressive acceleration from the 0.3% rate of growth in the last quarter. On an annual basis, GDP growth rose to 1.8%, up from 1.4%, indicating a resilient economy despite challenges in employment numbers.
In response to these mixed economic signals, the US Dollar Index (DXY) struggles just below the critical psychological mark of 98.00. Today during the American trading session, AUD/USD bounced off daily lows and rallied back towards 0.6580. It has been up almost 0.50% today by this writing. This movement can be taken to mean that such traders are cautiously optimistic about the Australian currency in light of volatile economic indicators.
Market participants meanwhile, are all looking for guidance from the Reserve Bank of Australia (RBA). The sharp recent decline in employment and inflation numbers will soon inform the most important monetary policy decisions. The RBA’s next meeting will give further clues as to the policymakers’ game plan. Developing federal policies that will meet the urgent twin challenges of rising inflation and getting people back to work in a changing economy.