The Australian dollar rallied sharply on Thursday after official data revealed the economy added 44,000 jobs in May, far surpassing market expectations of 20,000. The unemployment rate held steady at 3.9%, near five-decade lows, while the participation rate climbed to 66.8%, signaling robust labor market conditions.
The strong figures immediately shifted market pricing for a Reserve Bank of Australia rate hike at its August meeting from 35% to 45%, providing a direct boost to the currency. The AUD/NZD cross rate rose to a one-week high of 1.0835, as the RBA’s hawkish stance contrasted with the Reserve Bank of New Zealand’s signals that it may begin cutting rates as early as November amid falling business confidence and declining dairy prices. The policy divergence has been a key driver of the cross rate in recent weeks.
Simultaneously, the AUD/JPY pair climbed 0.6% to 97.45, with the Australian dollar benefiting from the widening interest rate differential against the Bank of Japan’s ultra-loose -0.1% policy. The pair, often considered a barometer of risk sentiment, reflected improved appetite for riskier assets alongside stable global equity markets. Westpac analysts noted the jobs data “reduce the urgency for RBA rate cuts,” supporting the Australian dollar in the near term, though gains were capped by concerns over China’s economic slowdown.
Technical resistance for AUD/NZD is seen at 1.0850 and 1.0900, while AUD/JPY faces a key barrier at 97.50 with a break potentially targeting 98.00. The broader trend will hinge on upcoming inflation data from both Australia and New Zealand, as well as central bank meetings in August.
