Australian Dollar rallies to over one-week high vs NZD on upbeat Aussie jobs data

• AUD/NZD gains strong positive traction as the Aussie rallies in reaction to the upbeat jobs data.
• The crucial employment details reaffirmed market bets for more interest rate hikes by the RBA.
• Expectations that the RBNZ will deliver another rate hike in September might cap further gains.

The AUD/NZD cross attracts fresh buyers following the release of the monthly Australian jobs report and climbs to a one-and-a-half-week high, around the 1.2060-1.2065 region, during the Asian session on Thursday. Spot prices now look to build on this week's bounce from the 1.1935 area, or the lowest level since late March.

According to the official data released by the Australian Bureau of Statistics (ABS), Australia’s Unemployment Rate stayed at 4.4% in June and the number of employed people rose by 76.3K, surpassing even the most optimistic estimates. This comes on top of rising bets for more interest rate hikes by the Reserve Bank of Australia (RBA), which, in turn, provides a goodish lift to the Australian Dollar (AUD) and the AUD/NZD cross.

Strategists at Brown Brothers Harriman note that market pricing still leans toward further tightening, with "RBA cash rate futures imply 60% odds of one final 25bps hike by year end to 4.60%." However, they caution that "the risk is skewed towards a more extended pause in the RBA tightening cycle," a stance they argue is likely to remain "a headwind for AUD."

The New Zealand Dollar (NZD), on the other hand, struggles to attract any meaningful buyers as escalating US-Iran tensions continue to benefit the safe-haven US Dollar (USD). However, expectations that the Reserve Bank of New Zealand (RBNZ) will deliver another rate hike at its September meeting, bolstered by stronger-than-expected inflation data from New Zealand, could support the NZD and cap gains for the AUD/NZD cross.

Strategists at Brown Brothers Harriman argue that “above target inflation and a more favorable domestic growth outlook argue for additional RBNZ rate hikes which is NZD supportive.” They note that at its last July 8 meeting, the RBNZ raised the Official Cash Rate 25bps to 2.50% and indicated that “further OCR increases appear likely at upcoming meetings,” reinforcing the constructive backdrop for the Kiwi.