Australia unemployment rate expected to edge lower in July, improving to 4.2%

• The Australian Unemployment Rate is foreseen at 4.2% in July, down from the 4.3% hit in June.
• Australia is expected to have added 25,000 new positions in the month, after two months of disappointing figures.
• The Reserve Bank of Australia trimmed the Official Cash Rate to 3.6% in its August meeting.
• AUD/USD is technically bullish and could revisit the July peak at 0.6625.

Australia will release its July monthly employment report on Thursday at 1:30 GMT, following the Reserve Bank of Australia (RBA) decision to trim the Official Cash Rate (OCR) by 25 basis points (bps) to 3.6%.

The Australian Bureau of Statistics (ABS) is expected to announce that the country added 25,000 new job positions in the month, after adding the measly 2,000 announced in June. The Unemployment Rate is foreseen declining to 4.2% after spiking to 4.3% in the previous month, while the Participation Rate is expected to remain unchanged at 67.1%.

Australian ABS reports both full-time and part-time positions through the monthly Employment Change. Generally speaking, full-time jobs imply working 38 hours per week or more and usually include additional benefits, and they mostly represent consistent income. On the other hand, part-time employment generally means higher hourly rates but lacks consistency and benefits. That's why the economy prefers full-time jobs.

Back in June, the country lost 38,200 full-time positions, while adding 40,200 part-time ones, quite a discouraging employment report.

Australian unemployment rate expected to tick lower in July

The Australian monthly employment report has offered relatively tepid readings for two months in a row. The economy lost 2,000 positions in May and added 2,000 in June. The May negative reading included a sharp decline in part-time jobs, making it less worrisome than the June one. Despite ending up positive, the latest employment report included a massive decline in full-time positions.

A loosening labour market is generally understood as negative for the economy, but it also means the central bank has no reason to keep interest rates at high levels. Most central banks have claimed that the strength of the sector has somehow limited their decisions to go further down with record rates, and Australia is no exception.

The latest employment figures have prompted the RBA's Board to note that "Labour market conditions have eased further in recent months," although policymakers said that conditions remain a "little tight."

The central bank met earlier this week and, as previously noted, decided to trim the benchmark rate by 25 bps from 3.85% to 3.6%. Policymakers' decision was unanimous, as they also agreed that inflation has continued to moderate. Other than that, the Board remains cautious about the outlook, while acknowledging that there is "a little more clarity on the scope and scale of US tariffs and policy responses in other countries, suggesting that more extreme outcomes are likely to be avoided."

Finally, the RBA forecasts inflation to remain within its goal for this year and the next two, while growth is expected to be at 1.7% in 2025 and advance to 2.1% in 2026. Regarding the Unemployment Rate, policymakers forecast it at 4.3% between 2025 and 2027.

RBA Governor Michele Bullock offered a press conference following the rate announcement and clarified that a larger rate cut was not on the table. Still, Bullock said that the Board forecasts imply the cash rate might need to be lower to achieve price stability.

Meanwhile, it is worth adding that Australian wage growth remained stable in the second quarter of the year, according to the latest ABS report. The wage price index grew 3.4% on a yearly basis, the same rate of increase as seen in the three months to March, and slightly above the 3.3% anticipated. However, on a quarterly basis, the wage price index rose 0.8% in Q2, easing from the previous 0.9% and matching expectations.

With that said, tepid job creation is helping reduce interest rates, which in the end, will translate into economic progress. Generally speaking, a strong employment report, with a further easing of the Unemployment Rate and more solid job creation, should provide a boost to the Australian Dollar (AUD). The opposite scenario is also valid, with a softer-than-anticipated outcome putting pressure on the AUD.

When will the Australian employment report be released and how could it affect AUD/USD?

The ABS July report will be released early on Thursday, and as previously noted, the Australian economy is expected to have added 25,000 new job positions in the month, while the Unemployment Rate is foreseen at 4.2% and the Participation Rate at 67%.1.

Ahead of the announcement, the AUD/USD pair posted a nice comeback from the post-RBA low at 0.6481 and hovers around 0.6550 as a better market mood took its toll on the US Dollar (USD). Steady inflation in the United States (US), as reported by the Bureau of Labor Statistics (BLS) through the monthly Consumer Price Index (CPI) report, fueled speculation that the Federal Reserve (Fed) will deliver a rate cut when it meets in September.

Valeria Bednarik, Chief Analyst at FXStreet, notes: "The AUD/USD pair trades near a fresh two-weekly high of 0.6562, and is technically poised to extend its advance. In the daily chart, a bullish 100 Simple Moving Average (SMA) has provided support since mid-April, currently standing at around 0.6440, and a potential bottom should the pair collapse with the news. In between, near-term supports come at 0.06520 and 0.6470."

Bednarik adds: "The AUD/USD pair peaked at 0.6625 in July, with gains beyond the recent weekly high favoring a test of the level. Once beyond it, AUD/USD can rally towards the 0.6670 region before finding near-term sellers."