Australia’s stellar jobs report for March has given the Australian dollar a new lease on life. AUDUSD was propelled around 1.0% higher in the immediate after the release of the figures earlier today, with the pair annihilating a resistance zone around 0.7750.
Australia’s unemployment rate dropped to 6.1% in March from a revised 6.2% in February, as the economy added 37.7K jobs last month, more than doubling market expectations, and employment growth in February was revised much higher (42K vs. 15.6K).
The deeper we look into the jobs report, the better it gets
Not only did the economy add a substantial amount of jobs over the last two months, they largely considered of full-time employment which is more indicative of a healthy economy than persistent growth in part-time employment. 73.4K full-time jobs were added in February and March alone, with 31.5K being added in March and February’s figure was revised to 41.9K from 10.3K previously. Also, the labour force participation rate jumped to 64.8% in March from a revised 64.7% in February (the un-revised figure was 64.6%).
In light of all this positive employment data, it’s no wonder the Australia dollar had such a positive reaction to the report. The data is strong enough to cast doubt over the previously almost rock-solid assumption that the RBA would cut interest rates in May. Prior to today’s figures the market was pricing in around a 75% chance of a rate cut next month, but this has dropped to around 56% at the time of writing. Also, we doubt every economist surveyed by Bloomberg still thinks the RBA is going to lower the OCR by 25 basis points next month, as they did at the end of last week.
On the back of today’s employment-fuelled surge in AUDUSD, the next big test for the pair may come from a resistance zone around 0.7800. It’s not just that March’s employment report was inspiring, February revised report was even more encouraging. The market can sometimes brush aside one good data release as an outlier, but it cannot ignore two consecutive months of very strong data, even in if the accuracy of the report is under question. Combined with the recent unwinding of US dollar longs, today’s data should help to keep AUDUSD on the front foot in the near-term.