Australia added 47.5 thousand jobs last month. The labor market remains tight, although there are signs of a slowdown, Commerzbank’s FX strategist Volkmar Baur notes.

Inflationary dynamics to prevent RBA relief

“Over the past 12 months, more than 30,000 new jobs have been created per month, which is still well above the pre-pandemic run rate (22,000 per month). This has led to wages rising too fast to bring inflation back into the central bank's target range. And this jobs report is unlikely to ease the RBA's concerns.”

“There are early signs of a slowdown: full-time jobs were actually cut, and the increase was only in part-time positions. However, given the large number of jobs, this will not be enough to change the RBA's mind next week.”

“Therefore, I expect that the RBA will still not cut rates next Tuesday and will leave them at 4.35%. This is not ideal given the recent weakness in the economy. The economy would certainly welcome some relief. But it is still necessary given the inflationary dynamics.”