AUD/USD plunges from 0.7470 on higher than expected Unemployment Rate at 4%

• AUD/USD has attracted significant offers as the Australian jobless rate has landed at 4%.
• This has underpinned a neutral stance by the RBA in May’s monetary policy.
• The risk-on impulse has pushed the DXY below 100.00.

The AUD/USD pair has witnessed a steep fall after hitting an intraday high of 0.7468 as the Australian Bureau of Statistics has reported the Unemployment Rate at 4%. Australian jobless rate has remained lower than the market consensus of 3.9% but similar to the prior print of 4%. While, the Employment Change has landed at 17.9k, significantly lower than the estimates and the previous figure of 40k and 77.4k respectively.

Higher unemployment levels are signaling stagnant labor market conditions. It is worth noting that the University of Melbourne has reported the Consumer inflation expectations at 5.2%, significantly higher than the forecast of 4.6%.

It seems that the collective impact of higher consumer inflation expectations and a flat labor market will be resulted in a neutral stance by the Reserve Bank of Australia (RBA). Investors should be aware of the fact that the RBA kept its monetary policy unchanged last week. RBA Governor Philip Lowe dictated that the RBA is opting for a ‘wait and watch’ approach as the current price pressures are not advocating any sudden requirement of interest rate elevation. However, a rate hike can be announced later this year.

Meanwhile, the US dollar index (DXY) has witnessed an intense sell-off after a nine-day winning streak on Wednesday. The DXY has tumbled sharply below the critical support of 100.00. A firmer rebound in Wall Street on Wednesday has underpinned a positive market sentiment as the fears of higher US inflation faded away. This has further increased the demand for risk-perceived assets.