Pound Sterling Retreats from 2 Year High vs Australian Dollar

At the start of Asian session trade, the Australian dollar was once again battered after the unemployment data for July showed that the country lost -10.K jobs in the month versus an expected 6.0K gain.

The Australian dollar dipped on weaker than expected employment data, but then quickly recovered and hit fresh weekly highs after the release of Chinese Trade data that showed a significant pick up import demand.

Pound climbs to three year high against the Australian dollar

Richard Driver notes we are seeing some great levels in GBP / AUD at present:

"The pound climbed to an almost three-year high against the aussie dollar yesterday, as an upbeat Quarterly Inflation Report from the Bank of England and downbeat Australian employment figures conspired to drive the rate higher.

"Carney’s speech was less dovish than expected, triggering a sterling rally that pushed the rate against the aussie dollar above 1.73 for the first time since 2010. Australian employment change figures released overnight revealed Australian employers unexpectedly cut jobs in July. Markets had been expecting a small level of job creation.

"The Reserve Bank of Australia’s policy statement is due tonight, and will be scrutinised closely for further direction on aussie interest rates."

Australian economy continues to under-perform, warnings of a fresh interest rate cut

Boris Schlossberg says today's labour data was disappointing and he warns of potential AUD-neagative interest rate cuts lying ahead:

"The labour data was disappointing on all fronts as full time employment contracted by -6.7K versus -4.4K eyed and part time employment declined as well by -3.5K versus a prior gain of 14.8K. The unemployment rate dipped slightly to 5.7% from 5.8% but that was only because the participation rate dipped as well to 65.1 versus 65.3.

"Overall, this was just another in a series of depressing data points from Down Under that clearly showed conditions on the ground continue to deteriorate,"

"If the employment situation in Asutralia does not improve, the prospect of yet another rate cut by the RBA will increase markedly and the Aussie is likely to feel further downside pressure."

But, a short-term rally could be ahead

The Australian dollar could benefit from a relief rally in the short term.

Sean Lee at FXWW is an Aussie dollar bull at present saying he sees further gains in the AUD-USD rate ahead:

"I’ve added to my long position and I expect short covering to now pick up steam. The sharp increase in both imports and exports will encourage many that the global economy isn’t as sick as they had feared and should benefit risk trades like the AUD.

"If short-covering really accelerates, then I think we could see levels near .9200 later today."