Australian Dollar remains subdued following labor data

• AUD/USD loses ground as the Australian Dollar holds losses following domestic labor market data.
• Australia's Unemployment Rate ticked down to 4.4% from 4.5%, as the economy added a strong 40.3K jobs in May.
• CME FedWatch tool indicates markets are now pricing in an 83.1% probability of rate hikes by the end of December.

AUD/USD continues its losing streak for the eighth consecutive day, trading around 0.6900 during the Asian hours on Thursday. The pair remains subdued as the Australian Dollar (AUD) holds losses following the release of domestic labor market data.

According to the latest data from the Australian Bureau of Statistics (ABS), Australia’s labor market showed strong signs of recovery in May, highlighted by the Unemployment Rate trickling down to 4.4% from April's 4.5%. This drop aligned perfectly with market expectations. The most striking takeaway from the report was the net Employment Change, which saw an influx of 40.3K jobs. This easily surpassed the consensus forecast of a 25K increase and marked a sharp turnaround from the 40.7K jobs lost during the previous month.

Under the hood, the data reveals that while the overall Participation Rate held steady at 66.7%, the workforce expansion was primarily driven by part-time roles. Part-Time Employment surged by 35.2K positions, completely reversing the 19K decline seen in April. Full-Time Employment also bounced back, albeit more modestly, adding 5.2K jobs following a notable drop of 21.7K in the prior reading.

The AUD/USD pair weakens as the US Dollar (USD) may continue its winning streak amid rising market expectations of Federal Reserve (Fed) interest rate hikes later this year. Traders are positioning for tighter monetary policy after Federal Reserve Chairman Kevin Warsh signaled a firm focus on taming inflation, noting that the broader economy remains on a stable footing. Reflecting this hawkish shift, the CME FedWatch tool shows that markets are now pricing in an 83.1% probability of rate hikes by the end of December.

Traders await the upcoming US Personal Consumption Expenditures (PCE) data release due later in the day, where headline inflation is expected to heat up to 4.1% YoY in May from April's 3.8%, and core PCE is projected to edge higher to 3.4% YoY.