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The most important economic event that is scheduled for this week is the employment data of the Australian labour market for the previous month of July, which is going to be reported by the Australian Bureau of Statistics on Thursday. Predominantly the market forecasts project the unemployment rate to have remained unchanged for the fourth consecutive month at 5.2 per cent.
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In its latest monetary policy statement in August, the Reserve Bank of Australia commented on both the well-performing aspects of the Australian labour market as well as on the apparent spare capacity that is yet to be improved. On the one hand, the Australian economy is currently sustaining a historically high participation rate, which was reported at 66 per cent in the labour force issue for June.
On the other hand, the overall unemployment rate suggests that the labour market is still shying away from its optimal performance capacity, and the RBA expects the rate to decrease to around 5.0 per cent within two years.
“Employment has grown strongly over recent years and labour force participation is at a record high. There has, however, been little inroad into the spare capacity in the labour market recently, with the unemployment rate having risen slightly to 5.2 per cent. […] Wages growth remains subdued and there is little upward pressure at present, with strong labour demand being met by more supply. […] Taken together, recent labour market outcomes suggest that the Australian economy can sustain lower rates of unemployment and underemployment.” [source]
Even though a decrease in the overall unemployment rate is not expected to take place so soon, a slight improvement in the participation rate above 66 per cent is going to confirm the projections of the RBA, and also the recent trend of strengthening labour market. Thus, Thursday’s latest Labour Force Issue for July is expected to resemble the preceding issue quite closely in that the total number of both employed and unemployed persons is expected to rise marginally.
Such a development would undoubtedly have a positive effect on the labour force’s participation rate and also validate the RBA’s arguments in regards to the ‘strong labour demand being met by more supply’. Thus, even if the total number of unemployed persons ultimately rises, the aggregate unemployment rate should not exceed its present rate of 5.2 per cent.
Overall, the AUDUSD is still trading just above the fundamentally important support level at 0.67400, which continues to prevail despite recent downward pressure. The pair temporarily reached 60 pips below the set level during last Friday's trading session but then quickly recovered (you can read more about the level's importance here).
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