Australian Dollar: Softer jobs data keeps RBA sidelined – BBH

Brown Brothers Harriman’s (BBH) Elias Haddad notes AUD/USD is holding gains on broad US Dollar weakness despite a soft July Australian labor report. The economy unexpectedly lost jobs, with rising unemployment and falling hours worked pointing to weaker labor demand. Haddad argues easing labor conditions support the Reserve Bank of Australia staying on hold, though attractive carry and commodity exposure remain key Australian Dollar tailwinds.

Weak labor data, supportive AUD carry

"AUD/USD is holding on to yesterday’s gains triggered by broad USD weakness. Australia’s July labor force report was soft. The economy unexpectedly lost -15.8k jobs in July (consensus: +12k) vs. +80.2k in June, driven by lower part-time employment (-32.2k vs. +31.4k in June)."

"Encouragingly, full-time employment rose 16.3k in July and the previous month’s gain was revised 20k higher to +48.9k."

"More concerning, the unemployment rate rose 0.1ppt to 4.5% (consensus: 4.4%) despite a lower participation, while hours worked fell -0.6% m/m. This suggests weakness in labor demand rather than an increase in labor supply. "

"The continued easing in labor market conditions reinforces the case for the RBA to remain on hold for some time. Regardless, Australia’s attractive carry alongside the country’s strategic exposure to commodities linked to energy, AI, and defense remain key AUD tailwinds."