The Australian Dollar (AUD) remained subdued following the release of May labor market data, with AUD/USD extending its losing streak for the eighth consecutive day and trading around 0.6900 during Asian hours on Thursday [1]. Similarly, the AUD/JPY cross attracted sellers, sliding closer to its lowest level since late April and trading just below mid-111.00s, down about 0.20% for the day [2].
According to the Australian Bureau of Statistics (ABS), the Unemployment Rate fell to 4.4% in May from 4.5% in April, matching market expectations [1][2]. The net Employment Change showed a strong recovery, with an increase of 40.3K jobs, surpassing the consensus forecast of 25K and marking a sharp turnaround from the previous month's revised loss of 40.7K jobs [1][2]. The workforce expansion was primarily driven by part-time roles, which surged by 35.2K positions, reversing a 19K decline in April. Full-time employment also rebounded, adding 5.2K jobs after a drop of 21.7K in the prior reading [1]. The Participation Rate held steady at 66.7% [1].
Despite the positive employment data, the AUD weakened as traders positioned for tighter US monetary policy. Federal Reserve Chairman Kevin Warsh signaled a firm focus on taming inflation, and the CME FedWatch tool indicated an 83.1% probability of US rate hikes by the end of December [1]. Additionally, traders awaited the US Personal Consumption Expenditures (PCE) data release, with headline inflation expected to rise to 4.1% YoY in May from 3.8% in April, and core PCE projected to edge higher to 3.4% YoY [1].
On the AUD/JPY front, the risk-sensitive AUD was weighed down by mixed Australian consumer inflation figures and a cautious market mood [2]. Heightened speculation of joint US-Japan currency intervention supported the Japanese Yen (JPY), with Japan's Finance Minister Satsuki Katayama and US Treasury Secretary Scott Bessent agreeing to take steps on currencies if necessary. Japan’s Chief Cabinet Secretary Minoru Kihara also stated he would take appropriate action against foreign exchange moves if needed [2]. The Bank of Japan (BoJ) minutes and statements from board members, including Naoki Tamura, indicated a hawkish stance, with calls for faster rate increases to address mounting inflation risks [2].
Despite Japan's borrowing costs remaining lower than Australia’s, traders are pricing in roughly 15 basis points of additional tightening by the Reserve Bank of Australia (RBA) for the remainder of the year, which may limit further losses in the AUD/JPY cross [2]. However, the breakdown below the 100-day Simple Moving Average (SMA) for the first time since June 2025 suggests continued downside risk for spot prices [2].
CONCLUSION
Australia's labor market data showed robust job gains and a lower unemployment rate, but the Australian Dollar remained under pressure amid global rate hike speculation and cautious market sentiment. While the RBA is expected to tighten further, aggressive bearish bets on AUD/JPY may be limited. Overall, the market takeaway is that positive domestic data is being overshadowed by external monetary policy dynamics and intervention fears.