Australian Dollar Reaction Muted as Unemployment Hits 4.5%

Australia's labor market continued to soften in July, with unemployment rising to 4.5% and job growth contracting by -15.8k. This is unlikely to trigger a policy shift from the Reserve Bank of Australia (RBA), but further reduces the case for another hike.

The Australian dollar reaction was muted overall, although AUD/JPY and AUD/NZD are showing more interesting signs of bearish momentum.

RBA cash rate futures were 50/50 on a hike by December and only marginally better for a hike by March. However, with unemployment rising, participation and job growth low, those narrow odds are diminishing further.