Australian Labor Market Surprise Sends RBA Hike Odds Soaring

The recent Australian labor market data has sent shockwaves through the market, raising the implied probability of an Reserve Bank of Australia (RBA) interest rate hike to 30%. Commerzbank's Volkmar Baur notes that the strong jobs report, which saw 76,000 new positions created in June, is a significant positive surprise. The unemployment rate rose slightly from 4.36% to 4.43%, but this was largely due to an increase in labor force participation, which returned to historic highs.

Despite the upbeat data, Baur still expects no RBA move in August, citing upcoming inflation and housing data as potential complications. However, he sees scope for a more hawkish communication from the central bank, which could support the Australian Dollar (AUD). The market's focus will now shift to next week's inflation data and real estate market numbers at the end of the month.