What’s going on here?

The Australian dollar got a boost from unexpectedly strong jobs data, despite concerns over China’s housing policy weighing on its primary export, iron ore.

What does this mean?

Australia’s labor market showed unexpected strength in September, adding 64,100 jobs against an expected 25,000, keeping unemployment steady at 4.1%. This positive news lifted the Aussie dollar to an intraday high of $0.6710 before settling at $0.6684. However, Chinese housing policy disappointments affected iron ore prices, limiting the currency’s gains. Plus, this solid employment data has dropped the likelihood of a year-end interest rate cut by the Reserve Bank of Australia to 31%, down from 46%. With three-year and ten-year government bond yields rising, Australia’s economic outlook remains cautiously positive in light of external issues.

Why should I care?

For markets: Australia bucks the trend.

Australia’s strong jobs report defied global economic worries, showing resilience and potentially delaying interest rate cuts. With employment surpassing expectations and solid bond yields, investor sentiment leans optimistic despite pressures from China’s economic policies. This robust job market highlights Australia’s economic health and may keep the Aussie dollar strong in the near term.

The bigger picture: China looms large in the background.

Australia’s dependence on China for exports means changes in Chinese policy and demand greatly influence its economy and currency. While strong domestic employment offers a buffer, the broader economic path remains tied to developments in China, especially regarding iron ore—a vital income source. Global investors will closely watch China’s moves, gauging potential impacts on commodity-reliant economies like Australia’s.