Australia’s labour market may show softer momentum in March, but traders are still positioning for a Reserve Bank of Australia (RBA) rate hike in May and a firmer Australian dollar, according to analysis from ING.
Jobs data expected to cool, but not enough to sway RBA
Forecasts point to a March employment gain of about 20,000 jobs, though that is viewed as optimistic given the recent pattern of alternating strong and weak readings. The unemployment rate is expected to edge up from 4.3% to 4.4%, with the participation rate seen broadly unchanged.
ING’s Pesole argues that even a weaker-than-expected print is unlikely to shift the RBA’s near-term stance. Inflation containment remains the central focus, and markets continue to treat a May rate hike as the base scenario rather than a move later in the year.
ASX 30 Day Interbank Cash Rate Futures on 14 April were implying around a 64% chance of an increase in the cash rate to 4.35% at the 5 May policy meeting.
Evidence of labour market resilience
More up-to-date data suggest the labour market remains tighter than many expected. CommBank estimates indicate roughly 23,000 jobs were added in March, while online job advertisements rose 1.2% in the month.
This underlying strength supports the view that the central bank can maintain its tightening bias to keep inflation expectations in check.
RBA focus: expectations, not immediate price shocks
Deputy Governor Andrew Hauser recently underlined that monetary policy has limited ability to offset immediate price spikes. The priority is to stop short-term inflation from becoming entrenched in long-term expectations.
Hauser also described Australia’s position as a “large real income shock”: the country is a net energy exporter but remains heavily dependent on imported oil, complicating the policy backdrop.
Aussie dollar gains on global backdrop and commodities
ING still sees room for the Australian dollar to hold or extend gains against the U.S. dollar, with a quarterly AUD/USD target of 0.7200. The currency’s strength is being supported by:
- relatively high domestic interest rate expectations
- firm commodity prices and solid export values
- external factors, especially U.S. dollar weakness
Hopes for a lasting ceasefire between the United States and Iran have reduced safe-haven demand for the greenback, pushing the U.S. Dollar Index to its lowest level since early March. That has helped lift AUD/USD above 0.7100, trading around 0.7138 on 15 April.
Technical signals now point to a potential test of the year-to-date high near 0.7185, with a move toward 0.7200 seen as likely in the short term, barring a sharp reversal in risk sentiment.
Domestic sentiment slumps despite strong currency
The domestic backdrop is not uniformly positive. The Westpac–Melbourne Institute consumer sentiment index fell 12.5% in April to 80.1, signalling deep pessimism among households.
This contrast between weakening confidence and a rising currency underscores a market narrative driven more by monetary policy expectations and global risk conditions than by local sentiment indicators, at least for now.
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