Will Australia’s Tight Labor Market Shift RBA’s Rate Strategy?
Turning to Australia, labor market data will likely impact the AUD/USD pair and the RBA rate path. Economists expect the Aussie unemployment rate to remain at 4.2% in September, with full-time employment projected to increase by 15k, after a 3.1k fall in August.
Tighter labor market conditions could boost wage growth, possibly fueling demand-driven inflation. The combination could delay RBA discussions on interest rate cuts as the Board assesses the effects on inflation.
During the latest RBA press conference, Governor Michele Bullock warned that inflation could fall within the target range, but may not reflect underlying inflation. Tighter labor market conditions and higher wages would align with the RBA’s views on inflation trends.
Australian Dollar Daily Chart
The AUD/USD is trading above $0.66500, though it remains comfortably below the September 30 high of $0.69420.
In today’s US session, a sharp retreat in jobless claims and upbeat retail sales figures could influence the Fed rate path, potentially pulling the AUD/USD toward $0.66000. Conversely, higher jobless claims could signal labor market weakness, potentially fueling expectations for aggressive Fed rate cuts. Weak US data could drive the AUD/USD toward $0.67.
