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Strong Labour Market Data Boosts AUD/USD Exchange Rate after Fed Hikes Interest Rates

Australian Dollar Exchange Rates

The Australian Dollar rose today versus the US Dollar after strong domestic labour market data.

Despite another interest rate hike from the US Federal Reserve, accompanied by strong forecasts for the economy, the AUD/USD exchange rate has ended the day up half a per cent in the region of 0.7665.

Solid Figures from Jobs Market Supports Australian Dollar (AUD) Exchange Rates

November’s Australian employment data has significantly beaten forecasts, showing that the number of additional people employed beat the consensus amongst economists more than threefold.

Instead of rising by 19,000 as predicted, the employment change figure clocked in at 61,600 in a sign the domestic labour market is on buoyant form.

October’s uptick in employment was retrospectively revised up to 7,800.

Even more positive was the fact that the bulk of new hires had entered full-time employment rather than part-time work, with the full-time employment change figure rising from an upwardly-revised 31,000 for October to 41,900 last month.

Although this figure was not enough to push the unemployment rate down below the current 5.4%, there was an uptick in the participation rate, which rose from an upwardly revised 65.2% to 65.5%.

The latest Chinese retail and industrial production figures also proved largely supportive of the ‘Aussie’ as, despite edging slightly lower overall, the data indicated that growth still remained firm.

FOMC Acts as Expected; US Dollar (USD) Falls as Markets Profit-take Following Policy Announcements

The US Dollar is on soft form this morning, after the early morning Federal Open Market Committee (FOMC) monetary policy meeting delivered pretty-much what markets were expecting.

Barclays explains;

‘At its December meeting, the Federal Open Market Committee (FOMC) raised the target range for the federal funds rate by 25bp to 1.25-1.5%, a move that was in line with our expectation and widely anticipated by markets heading into the meeting. The committee made only modest changes to the FOMC statement.’

‘…Also notable to us was the two dissents, one from Chicago Fed President Evans … a surprise to us as he generally prefers to avoid dissents in favor of active discussion at the table during the meeting itself.’

As this was largely what markets had expected and the move to tighten borrowing costs was firmly priced-in to USD exchange rates, so the announcements prompted a wave of profit-taking that has kept the ‘Greenback’ weak today.

Will BoE and ECB Meetings and US Retail Data Pressure AUD/USD Exchange Rates Lower?

Although the day’s Australian data has already been released, overnight developments on the economic calendars of nations with safer currencies than Australia could threaten to undermine AUD.

With the Bank of England (BoE) and European Central Bank (ECB) both announcing their latest monetary policy decisions, there could be news that boosts market demand for the more reliable Pound or Euro.

Additionally, tonight’s US advance retail sales figures for November are expected to show a slight uptick in the rate of transaction growth from 0.2% to 0.3%, which could help USD recover some ground.

There could therefore be plenty overnight to weaken global risk-appetite, undermining the AUD/USD exchange rate.