ING’s Francesco Pesole sees downside risks to Australia’s March employment data and a possible uptick in unemployment, but does not expect this to derail a May rate hike by the RBA. With policymakers focused on inflation expectations and further tightening, he argues AUD/USD retains solid upside potential, especially if a peace deal supports exports and risk sentiment, challenging ING’s 0.720 quarterly target.

Soft jobs risk but RBA still seen hiking

"We see some downside risks to Australia’s March jobs figures, due at 02:30 BST tomorrow. Consensus at +20k for the typically volatile payroll print looks somewhat optimistic, given the clear tendency over the past year for negative reads to follow runs of positive data."

"We could see the unemployment rate edge up from 4.3% to 4.4% on the back of a softer jobs print and an unchanged participation rate. This should not yet reflect war‑related effects, but it could signal slightly softer labour market momentum heading into the conflict period."

"Would that be enough to avert a May hike by the RBA? We doubt it, for now."

"We sense a degree of urgency, and our base case remains a May hike rather than waiting until August."

"We think AUD/USD retains solid upside potential, net of re‑escalation risks. A peace deal would not necessarily imply a return to pre‑war energy prices, allowing AUD to benefit from both stronger export prices and improved risk sentiment."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)