Australian employment handily beat market expectations but failed to lift the Aussie through the psychologically key 1.0500 barrier as the headline data masked some structural weakness in the labor market. Australia generated 13.9K new jobs in November versus forecasts of flat growth as the unemployment rate declined to 5.2% from 5.4% in October. This was the second month in a row that labor data has beaten market expectations suggesting that underlying trend in the Australian economy remains positive.
However, the headline numbers may have skewed the results to the upside limiting the impact of the data on investor sentiment. All of the job gains were due to part-time rather than full time employment, with full time jobs actually declining by 4,200 in the past month. Furthermore, the participation declined to 65.1 from 65.2 the month prior thus creating the drop in the unemployment rate.
The Aussie initially spiked to 1.0480 in the aftermath of the news, but failed to move higher as sellers capped the rally ahead of the key 1.0500 level. It has since drifted to 1.0460 amidst mild risk off tone in late Asian trade. The latest labor data suggests that the RBA is likely to remain stationary for the foreseeable future, but in the current low volatility environment such lack of â€œnegativeâ€ catalysts is not enough to lift the Aussie as the pair needs a strong dose of risk sentiment in order to clear the 1.0500 barrier. Perhaps tomorrow’s NFP report could spark some buying momentum if it beats the market forecast. For now however, the Aussie remains well contained in 1.0450-1.0480 range.