Australian Unemployment Rate to remain at 4% in June, AUD/USD struggles to sustain gains

The Australian Unemployment Rate is foreseen unchanged at 4% in June.
Employment Change expected at 20K, down from the previous 39.7K.
AUD/USD struggles to extend gains ahead of the announcement.

With sentiment dominating financial markets, the Australian Bureau of Statistics (ABS) will release the monthly employment report on Thursday at 1:30 GMT. The country is expected to have added 20K new positions in June, while the Unemployment Rate is foreseen to remain steady at 4%. The Australian Dollar (AUD) heads into the event with a firmer tone against its United States (US) rival, with AUD/USD trimming part of its early week losses.

The ABS splits the headline Employment Change figure into full-time and part-time positions. As a rule of thumb, full-time jobs imply working 38 hours per week or more and usually include additional benefits, but they mostly represent consistent income. On the other hand, part-time employment generally means higher hourly rates but lacks consistency and benefits. That’s why full-time jobs have more weight than part-time ones when setting an AUD directional path.

Back in May, the monthly employment report showed that Australia managed to create 41.7K full-time jobs but lost part-time positions, resulting in a net Employment Change of 39.7K. The Unemployment Rate contracted from the previous 4.1% to 4%.

Australian Unemployment Rate seen stable in June

As previously noted, financial markets anticipate the Unemployment Rate will remain steady at 4% and that the economy created 20K new positions in June.

The Australian Unemployment Rate peaked at 4.1% in April, matching the January reading and a level not seen since 2022. A higher unemployment rate usually signals a loosening labor market, allowing central banks to cut interest rates.

The Reserve Bank of Australia (RBA), however, maintained the Cash Rate at 4.35% in its June meeting and seems in no rush to cut interest rates. It is worth reminding that the RBA’s “duty is to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.”

With that in mind, an easing Unemployment Rate and solid job creation will be seen as a tightening labor market, which means a further delay in potential interest rate cuts. In fact, the stronger the labor market, the higher the odds for a rate hike. The latest scenario is quite unlikely, given the risk it poses to economic growth, but speculative interest has not yet fully disregarded a potential rate hike. On rate cuts, bets keep moving forward, with the first potential trim in Australia foreseen in 2025.

When will the Australian employment report be released, and how could it affect AUD/USD?

The ABS will publish the June employment report early on Thursday. As previously stated, Australia is expected to have added 20K new job positions in the month, while the Unemployment Rate is foreseen at 4%. Finally, the Participation Rate is foreseen to hold at 66.8%.

The AUD/USD pair fell towards 0.6713 on Tuesday, clinching two consecutive daily losses despite an upbeat market mood that sent Wall Street into unexplored territory. However, stocks lost momentum, and the USD shed some ground with the pair bouncing from such a low and holding on to modest intraday gains at around 0.6740 ahead of the announcement.

From a technical perspective, Valeria Bednarik, Chief Analyst at FXStreet, notes: “The AUD/USD pair is bullish, although the momentum is missing. The daily chart shows a bullish 20 Simple Moving Average (SMA), partially losing its upward strength but still advancing below the current level and above mildly bullish 100 and 200 SMAs. Meanwhile, technical indicators hold onto positive levels, in line with the bullish case, but lack directional strength, suggesting investors are unsure where to go next.”

Bednarik adds: “AUD/USD has a strong static resistance level at 0.6770, with gains beyond it exposing the 0.6820/40 price zone. In the case of a bearish reaction, the pair will find support initially at around 0.6700, followed by the 0.6660 mark. As usual, the market will react not directly to the figures but to how those would affect the upcoming RBA monetary policy decision.”

Economic Indicator

Employment Change s.a.

The Employment Change released by the Australian Bureau of Statistics is a measure of the change in the number of employed people in Australia. The statistic is adjusted to remove the influence of seasonal trends. Generally speaking, a rise in Employment Change has positive implications for consumer spending, stimulates economic growth, and is bullish for the Australian Dollar (AUD). A low reading, on the other hand, is seen as bearish.

RBA FAQs

What is the Reserve Bank of Australia and how does it influence the Australian Dollar?

The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.

How does inflation data impact the value of the Australian Dollar?

While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.

How does economic data influence the value of the Australian Dollar?

Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.

What is Quantitative Easing (QE) and how does it affect the Australian Dollar?

Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.

What is Quantitative tightening (QT) and how does it affect the Australian Dollar?

Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.

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