AUD/USD advances on robust Australian labor data, US Dollar uncertainty

• The Australian Dollar rises, supported by strong Australian labor-market data and better-than-expected Chinese indicators.
• The end of the US government shutdown fails to stabilize the US Dollar.
• Markets remain cautious as the risk of missing or delayed US data keeps the Greenback under strain.

AUD/USD trades higher on Friday around 0.6550 at the time of writing, up 0.30% on the day, supported by renewed demand for the Australian Dollar (AUD) following solid economic releases from Australia and China, while uncertainty persists around the US Dollar (USD).

The Australian Dollar is benefiting from a stronger-than-expected labor market. The latest figures from the Australian Bureau of Statistics (ABS) showed the Unemployment Rate falling to 4.3% in October from 4.5% previously, along with a net Employment gain of 42.2K, including 55.3K new full-time jobs.

These numbers, which significantly exceeded expectations, reinforce the view that the Reserve Bank of Australia (RBA) could maintain a cautious stance. Remarks this week from Deputy Governor Andrew Hauser, who noted that policy may still be restrictive, add to this prudence.

Chinese data also supported the Aussie. According to the National Bureau of Statistics (NBS), Retail Sales rose 2.9% YoY in October, above the 2.7% forecast, while Industrial Production increased by 4.9% YoY. Although some indicators disappointed slightly, such as Fixed Asset Investment, the resilience in domestic demand remains supportive for Australia, given China’s role as its largest trading partner.

Against the AUD, the US Dollar is struggling to regain momentum despite the official end of the US government shutdown. The US Dollar Index (DXY) continues to show signs of weakness, weighed down by uncertainty surrounding forthcoming macro releases. Several federal agencies were unable to collect data during the shutdown, raising the possibility that key indicators, including October’s Consumer Price Index (CPI), could be delayed. The National Economic Council has already warned that some October datasets may never be published.

This uncertainty affects monetary-policy expectations. While the chance of a Federal Reserve (Fed) rate cut in December has recently fallen back near 50%, cautious remarks from Fed members highlight an environment caught between economic resilience and persistent inflation risks. Signs of labor-market cooling, with falling job creation in the ADP estimates and rising layoffs reported by Challenger, also contribute to the USD’s vulnerability.