It is possible that the jobs report is showing signs of seasonal volatility and it remains the case that policymakers are still set to be very mindful of inflationary risks. That said, the bigger picture is dominated by weakness in China’s economy. On the back of that, the AUD/USD looks vulnerable.

There is risk of further dips in the value of AUD/USD and we have revised down our forecast for AUD/USD to 0.62 on a three-month view. That said, we see the relative strength of Australian fundamentals as suggesting a recovery back to 0.70 on a 12-month view. This assumes an improved outlook for Chinese growth next year.