Australian employment printed much worse than expected declining by -27K versus 0K eyed as labor demand contracted for the first time in four months. The decline in labor was even worse than it appeared as the Australian economy lost -33.5K full time jobs while gaining only 6K part time jobs. The labor participation rate declined to 65.2% form 65.5% the month prior while the unemployment rate ticked up to 5.2% from 5.1% the month before.
The weak employment result almost assures another 25bp rate cut by the RBA at next monthâ€™s monetary policy meeting as policymakers respond to the growing slowdown in Asia Pacific region. Ahead of the report swap markets had priced in the possibility of a rate cut at 74% and those odds are likely to have increased markedly in the aftermath of the disappointing data.
AUD/USD immediately lost more than 50 points dropping below the key 1.0200 level as traders quickly bailed out of their longs. The pair may see further selling into Asian and European trade as currency markets begin to price in the prospect of further rate cuts by the RBA which would diminish Aussieâ€™s attractiveness as a carry trade candidate.
Attention will now turn to Chinese data later in the week, and if the GDP data out of China also proves disappointing the Aussie could unwind all the way towards parity over the next several days as markets begin to price in the possibility of marked slowdown of economic activity in Asia.