A strong jobs report and weak US manufacturing figures sent the Australian dollar US dollar exchange rate 1% higher on Thursday. The pair rallied through $0.68 to a monthly high of $0.6834.

A decline in unemployment in the Australian Bureau of Statistics labour market report lifted the Australian dollar on Thursday. The report showed that the nations unemployment rate unexpectedly slipped to 5.2% in September, down from 5.3% the previous month.  Job creation was lower than what analysts had been expecting at 14,700. However, the number of full-time jobs created beat expectations and made up from the losses in the previous month.

The labour market report sent the Aussie dollar firmly higher. This is because the Reserve Bank of Australia watch employment figures closely for directing monetary policy.  A strong report means that the RBA could be less inclined to cut interest rates again, from their current record lows. Australian dollar investors currently place the odds of another rate cut by the end of the year at 70%.

 

How does strong jobs data boost the currency?
It works like this, when there is low unemployment and high job creation, the demand for workers increases. As demand for workers goes up, wages for those workers also go up. Which means the workers are now taking home more money to spend on cars, houses or in the shops. As a result, demand for goods and services also increase, pushing the prices of the goods and services higher. That’s also known as inflation. When inflation moves higher, central banks are more likely to raise interest rates, which then pushes the worth of the currency higher.

 

There is no more high impacting Australian data due to be released this week. This means that the Australian dollar react primarily to any trade headlines. Otherwise, it will move at the will of the US dollar.

Dollar Drops On Weak Manufacturing Figures

The US dollar extended losses on Thursday as investors grew increasingly concerned over the health of the US economy. After terrible US retail sales data yesterday, industrial production figures today were just as dreary. US industrial production contracted by -0.4% month on month in September, the biggest drop since April.

Manufacturing production fell -0.5% in September, compared to the previous month. The strike at General Motors, which started mid-September will have reduced output and clouds the data to a degree. That said, it is still clear that the ongoing US – China trade dispute is negatively impacting US factory activity.

There is no further high impacting US data this week. Instead investors will look to Chinese GDP data to assess the impact on the ongoing trade war on the world’s second largest economy. Analysts are forecasting that GDP will have ticked lower to 6.2%. A weak reading could hit risk sentiment sending investors in search of the safe haven dollar.

 

What do these figures mean?
When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute.

For example, it could be written:

1 USD = 0.6784 AUD

Here, $1 is equivalent to approximately A$0.67. This specifically measures the US dollar’s worth against the Australian dollar. If the Aussie dollar amount increases in this pairing, it’s positive for the US dollar.

Or, if you were looking at it the other way around:

1 AUD = 1.4739 USD

In this example, A$1 is equivalent to approximately $1.47. This measures the Australian dollar’s worth versus the US Dollar. If the US dollar number gets larger, it’s good news for the Aussie dollar.

 

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