The Australian Dollar recoups losses after the release of the labor market report

The Australian Dollar (AUD) recovered its daily losses and extended its gains against the US Dollar (USD) following Thursday's labor market report. Traders are also evaluating the Federal Reserve’s (Fed) 50 basis points (bps) rate cut announced on Wednesday.

Australian Employment Change increased by 47.5K in August, a decrease from July's 58.2K but significantly higher than the consensus forecast of 25.0K. The Unemployment Rate remained unchanged at 4.2% in August, consistent with expectations and the previous month’s figure, according to the Australian Bureau of Statistics (ABS).

The Federal Open Market Committee (FOMC) reduced the federal funds rate to a range of 4.75% to 5.0%, marking the Fed’s first rate cut in over four years. This decision underscores the Fed’s commitment to protecting the labor market and preventing a recession.

Federal Reserve Chair Jerome Powell noted during a press conference that, “This decision reflects our increased confidence that, with the right adjustments to our policy, we can maintain a strong labor market while achieving moderate economic growth and reducing inflation to a sustainable 2% level.”

Daily Digest Market Movers: Australian Dollar Gains After Strong Employment Report

• The Australian Dollar rises following a stronger-than-expected Employment Change report.
• Fed policymakers updated their quarterly economic forecasts, raising the median unemployment projection to 4.4% by the end of 2024, up from the 4% estimate in June. They also increased their long-term federal funds rate projection from 2.8% to 2.9%.
• JP Morgan CEO Jamie Dimon commented that whether the Federal Reserve cuts interest rates by 25 or 50 basis points, the impact will be "not earth-shattering." He emphasized that while rate cuts are necessary, they are relatively minor compared to the broader economic context, as reported by Bloomberg.
• US Retail Sales rose by 0.1% month-over-month in August, surpassing expectations of a 0.2% decline and indicating resilient consumer spending. The Retail Sales Control Group increased by 0.3%, slightly below the previous month's 0.4% rise.
• ANZ-Roy Morgan’s Australian Consumer Confidence climbed by 1.8 points to an eight-week high of 84.1. Despite this broad-based rise, confidence remains in pessimistic territory.
• Economists at Goldman Sachs and Citi have lowered their 2024 GDP growth forecasts for China to 4.7%, below Beijing's target of around 5.0%. SocGen describes the situation as a "downward spiral," while Barclays labels it as "from bad to worse" and a "vicious cycle." Morgan Stanley warns that "things could get worse before they get better," according to Reuters.
• The University of Michigan’s Consumer Sentiment Index rose to 69.0 in September, exceeding the expected 68.0 and marking a four-month high. This increase reflects a gradual improvement in consumers' outlook on the US economy.
• China's economy showed signs of weakness in August, with ongoing declines in industrial activity and real estate prices. The National Bureau of Statistics reported that Beijing faces growing pressure to increase spending to boost demand, according to Business Standard.
• Reserve Bank of Australia (RBA) Governor Michele Bullock stated it is premature to consider rate cuts due to persistently high inflation. RBA Assistant Governor Sarah Hunter noted that while the labor market remains tight, wage growth appears to have peaked and is expected to slow further.