Weak labour data has been weighing on the AUD recently. Although a healthy amount of full-time jobs was created in July, the unemployment rate hit the highest level since 2002. Accordingly investors’ RBA rate expectations have been adjusting lower.

However, it must still be noted that the RBA repeatedly stressed that it was prepared to see additional labour market weakness.

Looking ahead, improving business activity is rather pointing to rising hiring activity up ahead.

From that angle we do not expect the latest data to make a case of sustainably falling central bank rate expectations.

From that angle we expect currency downside from the current levels to remain limited.

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