For those that were cautiously optimistic about Australia's January Employment report, the actual result was a disappointing dose of reality about the stagnant growth prospects that are enveloping the country. Total employment fell by -3.7k, clearly surprising a market that was expecting a result above +15k and the unemployment rate spiked to +6.0%, the highest level since July 2003. Full-time employment fell by -7.1k while the economy added +3.4k part-time workers as the participation rate dipped to 64.5%. Faced with this, traders had no recourse but to bludgeon the AUD/USD as the pair immediately plunged to 0.8960 from its pre-release levels of 0.9030 and subsequently slid to current session lows of 0.8926 before stabilizing a bit.
This report further solidifies the likelihood that the RBA will keep monetary policy at its current levels for the foreseeable future. What remains to be seen is whether the economic indicators that the central bank focuses on, those that prompted them to switch away from the easing bias, will continue to progress as they might have hoped. If this is the case and global risk appetite emerges, then the Aussie might yet carve out a short term bottom and gradually reassert itself based primarily on the yield advantage that it enjoys against most of its G7 brethren. If this does not come to fruition then the RBA might have to reconsider the possibility of additional easing measures which would put the currency on the defensive yet again.