"Seasonal factors appear to have contributed to January's weakness, and we expect a return to solid employment growth in February" - ANZ.

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The Australian Dollar was quick to erase on Thursday the short-lived losses sustained after Australian Bureau of Statistics data warned of a year-end softening of the antipodean labour market which, if continued, could eventually have implications for Reserve Bank of Australia (RBA) interest rate policy.

Australian Dollars were bought while U.S, Dollars were sold on Thursday, leading AUD/USD to rise while keeping the often-negatively-correlated GBP/AUD under wraps near one-week lows as the market appeared to look through softer-than-expected employment figures from down under.

"Notwithstanding the difficulty of seasonal adjustment at the turn of the year, the labour market is deteriorating faster than the Reserve Bank of Australia (RBA) expects," says Joseph Capurso, head of international economics at Commonwealth Bank of Australia.

"The emerging weakness in employment may discourage the RBA from increasing the cash rate by 50bp in coming months as indicated. Reduced interest rate support may weigh on AUD/USD in the near term," Capurso writes in a Thursday market commentary.

Australian employment fell by -11.5k during January in a second successive fall that lifted the jobless rate to 3.7%, from a historic low of 3.5%.

Above: Pound to Australian Dollar rate shown at hourly intervals alongside AUD/USD. Click image for closer inspection.

This was after full-time employment fell by -43.3k to more than offset a 31.8k increase in part-time employment at the turn of the year, although it may be more relevant than usual that the above-referenced data is seasonally adjusted to remove the effect of systematic calendar-related patterns.

Systematic calendar-related patterns would include things like the effect that increased demand for temporary or seasonal workers around the Christmas holidays can have on overall employment, which continued to grow last month in non-seasonally-adjusted terms.

In non-seasonally-adjusted terms, employment rose to 13.75 million in January and the unemployment rate remained stable at 3.5%.

"Seasonal factors appear to have contributed to January's weakness, and we expect a return to solid employment growth in February. Labour demand remains very strong, and we do not expect unemployment to rise rapidly," says Catherine Birch, an economist at ANZ.

While it's possible that Thursday's employment figures are the result of a seasonal quirk, they did lead Australian government bond yields to fall more than major economy counterparts and any further indications of a softening labour market could ultimately have implications for RBA policy.

Above: Pound to Australian Dollar rate shown at daily intervals alongside AUD/USD. Click image for closer inspection. To optimise the timing of international payments you could consider setting a free FX rate alert here.

"The Board is seeking to return inflation to the 2–3 per cent range while keeping the economy on an even keel, but the path to achieving a soft landing remains a narrow one," Governor Philip Lowe said earlier in February.

"In assessing how much further interest rates need to increase, the Board will be paying close attention to developments in the global economy, trends in household spending and the outlook for inflation and the labour market," he added in partial conclusion of this month's statement.

The RBA raised its cash rate to 3.35% earlier in February, making for a ninth increase since May 2022, and warned that "further increases in interest rates will be needed over the months ahead to ensure that inflation returns to target."

However, the bank has also made clear that it seeks to avoid fomenting a 'hard landing' of the economy with its efforts to return Australia's 7.8% inflation rate to within the 2% to 3% target band, and has indicated repeatedly that it's willing to be patient in order to achieve that goal.

"The big question for us is: should we take this significant shift in employment growth at the end of 2022 and in early 2023 as the start of a new softer trend, or a correction in employment, despite business and household surveys still pointing to robust labour demand? We don’t think so," writes Justin Smirk, an economist at Westpac, following a review of the data.