- AUD/JPY rises on a strong Australian jobs report released on Thursday.
- Australia’s employment change increased by 64.1K, far exceeding the expected increase of 25.0K.
- The Japanese Yen lost ground as the domestic trade balance reported a larger than expected deficit of JPY 294.3 billion in September.
AUD/JPY gains momentum after two consecutive days of losses, trading near the key psychological level of 100.00 during the European session on Thursday. This upward movement is largely due to the strengthening of the Australian Dollar (AUD), following a robust Australian employment report.
In September, seasonally adjusted employment change increased by 64.1K, bringing total employment to a record 14.52 million, far exceeding market expectations of a 25.0K increase. This followed a revised 42.6K increase in August.
Additionally, Australia’s unemployment rate held steady at 4.1% in September, matching the revised August figure and beating forecasts of 4.2%. The number of unemployed fell by 9.2K, bringing the total to 615,700.
On the JPY side, the Japanese Yen (JPY) faces additional downward pressure following the release of weaker-than-expected trade balance data on Thursday. Japan’s trade balance reported a deficit of 294.3 billion JPY in September, compared to August’s larger deficit of 703.2 billion JPY. This marked the third consecutive month of trade deficit, and was worse than market expectations of a deficit of 237.6 billion JPY.
Japan’s exports declined 1.7% year-on-year in September, reversing the marginally revised 5.5% growth in August and missing forecasts for a 0.5% increase. This was the first drop in exports since November 2023. Meanwhile, imports rose 2.1% year-on-year, after a 2.3% increase in August, but also below the 3.2% growth expected by the market. Although this was the sixth consecutive month of import growth, it represented the softest growth in sequence.
This disappointing trade balance report adds further complications to the Bank of Japan’s (BoJ) plans to abandon its ultra-loose monetary policy, putting additional downward pressure on the Japanese Yen (JPY). Earlier in the week, BoJ board member Seiji Adachi warned that the BoJ should avoid making drastic changes to its policy, citing uncertainties in the global economic outlook and concerns about domestic wage growth.
Employment FAQs
Labor market conditions are a key element in assessing the health of an economy and, therefore, a key factor in the valuation of currencies. A high level of employment, or a low level of unemployment, has positive implications for consumer spending and therefore economic growth, boosting the value of the local currency. On the other hand, a very tight labor market – a situation in which there is a shortage of workers to fill vacant positions – can also have implications on inflation levels and, therefore, on monetary policy, since a supply of labor Low labor and high demand lead to higher wages.
The pace at which wages grow in an economy is key for policymakers. High wage growth means that households have more money to spend, which often translates into higher prices for consumer goods. Unlike other more volatile sources of inflation, such as energy prices, wage growth is considered a key component of underlying and persistent inflation, as wage increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding their monetary policy.
The weight each central bank assigns to labor market conditions depends on its objectives. Some central banks have mandates explicitly related to the labor market beyond controlling inflation levels. The United States Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the only mandate of the European Central Bank (ECB) is to keep inflation under control. Even so, and despite the mandates they have, labor market conditions are an important factor for authorities given their importance as an indicator of the health of the economy and their direct relationship with inflation.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
