Australian Dollar Outperforms on Strong Jobs Report

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The Australian dollar rose against other major currencies on Thursday following the release of better-than-expected labour market data.

Australia's employment grew by 53K jobs in March according to the latest Labour Force survey, surpassing market expectations of 20K.

The unemployment rate remained steady at 3.5%, defying expectations of a slight increase to 3.6%.

As a result of the better-than-expected numbers, the Australian dollar was the strongest-performing G10 currency on Thursday.

Commenting on the news, Valentin Marinov, Head of G10 FX Strategy said, "the AUD was an exception and an outperformer on the back of strong Australian labour market data."

The Pound to Australian Dollar exchange rate was a third of a per cent lower at 1.8587, ensuring a recent hot run for the pair is put on ice.

Meanwhile, Joseph Capurso, a strategist at Commonwealth Bank of Australia, noted that "AUD/USD jumped by around 30 pips following the much stronger than expected labour force report for March."

Money markets reveal investors have not materially raised expectations for another rate hike at the Reserve Bank of Australia (RBA) in light of the jobs report.

Swap rates increased by only several basis points in the 1-year to 5-year part of the curve.

OIS pricing for the Reserve Bank of Australia's May meeting is unchanged at 5bp, ie, 20% chance of a 25bp increase.

This suggests there is ample space for a rerating in RBA expectations going forward in light of strong data, which could provide the Aussie Dollar with some support.

"We expect the RBA to increase the cash rate next month. The Q1 CPI (released on 26 April) will firm up market pricing for the May meeting. A RBA rate hike can provide some support to AUD crosses," says Capurso.

Looking ahead, the focus will be on Australia's consumer price index (CPI) data, which is due to be released next week Wednesday.

A strong reading could reinforce expectations of a rate hike by the RBA, which could further support the Australian Dollar.