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The AUD rides high, supported by domestic data and a subdued U.S. dollar environment.
The Australian dollar advanced against the majority of its G10 currency peers on the day Australia surprised markets with a bumper jobs report.
"The Australian labour market report for June produced an exceptionally strong headline employment gain of 76.3k versus expectations of 15k," says Sam Hill, Head of Market Insights at Lloyds Bank, following Thursday's jobs release.
To be sure, 47k of that growth was accounted for by part-time additions, but that won't be enough to deflect from the still-healthy growth in full-time positions.
Furthermore, a welcome jump in the participation rate (that makes for a more productive population) was reported, a shift that keeps the unemployment rate at 4.4%, despite the job gains.
"Solid labour market data allow the Reserve Bank of Australia to keep its focus on inflation," says a response note from KBC Bank.
The RBA has raised interest rates three times already this year in response to Australia's hot economy, but in June it kept its policy rate unchanged at 4.35%, judging that it was wise to await the nature of incoming data before making further moves.
The central bank kept the door ajar to further rate hikes by saying it will "do what it considers necessary to achieve that outcome, including increasing the cash rate target further if required".
"With current strong labour market data and energy prices rising again, markets again fully discount an additional RBA rate hike by the end of the year," says KBC Bank.
Market Reaction: Firming the AUD Buy Case
Traders responded to that expectation by selling Aussie bonds, which pushed the three-year government bond yield 6.3 bps higher to 4.62%.
The data helped the Aussie dollar build on its recent gains and it stands as the second-best performing G10 currency on the day.
"The Aussie dollar gained modestly from the AUD/USD 0.669 area to currently 0.701," says KBC.
The pound-Australian dollar extends its fall from the 1.9361 July high to test 1.9064, a level last seen in late June.
Keep An Eye on the Greenback
Looking ahead, Australian dollar price action will be determined by the shape of CPI inflation data, which will be published next Wednesday, 29 July.
Should the numbers beat expectations, the odds of another rate hike at the RBA will become more assured, which should encourage the AUD to extend its relief rally.
However, it's worth remembering that the global picture will likely be more important in determining AUD price action: the recent pullback in the U.S. dollar in response to fading Federal Reserve rate hike bets was the trigger to the Aussie currency's recent recovery.
More dollar weakness will result in further AUD gains across the FX strip, while a USD comeback will have the opposite effect.
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