-AUD trades buoyantly after data draws line under 2018 jobs slowdown.

-Economy creates close to 60k new jobs in June, the highest this year.

-Data comes after Westpac-MI Leading Index flags economic slowdown.

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The Australian Dollar rose broadly Thursday after official data appeared to show the 2018 slowdown in Aussie jobs growth coming to an end in June.

Australia's economy created 59,900 new jobs during the recent month, according to the Australian Bureau of Statistics, up from 13,400 in May and far ahead of the consensus for an increase of 16,700. This was by-far the highest number of new jobs created in any month of the year to date.

This left the unemployment rate steady at 5.4%, in-line with expectations, despite a simultaneous 0.2% increase in the participation rate that meant there were more Australians who are technically classified as unemployed during the period.

"Across the country, NSW was the state with largest rise in employment (+27k), while jobs growth in Queensland was also very strong (+15k). WA (+3k) and Tasmania (+2k) saw small gains while employment in both Victoria (-7k) and SA (-1K) fell," says Felicity Emmett, a senior economist at Australia and New Zealand Banking Group.

Australian jobs growth has disapointed so far in 2018. After a 12 month period of jobs gains that were often in excess of 40,000 per month, new job creation averaged little more than 14,000 during the first five months of the year. Thursday's data changes that by pushing the monthly average up to 20,000.

"Leading indicators for the labour market have been more mixed of late. ANZ Job Ads fell 1.7% in June and have been trending lower since the spike in January. The soft tone to the ANZ Job Ads data contrasts, however, with the ABS vacancies data, which showed a 4.6% increase in job vacancies in the three months to May and suggest strong downside risks to the unemployment rate in the near term," says Emmett.

Markets care about the labour data because of the influence that changes in unemployment can have on wages and inflation, in that lower unemployment and faster wage growth means greater demand within an economy and higher inflation further down the line.

Accordingly, the data also has implications for interest rates at the Reserve Bank of Australia because it is inflation central banks are attempting to manipulate by tinkering with rates. Changes in interest rates, or hints of them being in the cards, impact currencies because of the push and pull influence they have on international capital flows and their allure for short-term speculators.

The Reserve Bank of Australia has held its interest rate at a record low of 1.5% for 23 consecutive months, citing below-target inflation and a debt laden household sector that it says is ill-equipped to handle the pressures of higher borrowing costs given years of weak wage growth. Markets do not see a change in policy coming until at least the middle of 2019.

"The strong labour market data was able to provide some support for the aussie this morning. However, overall the Australian currency still trades close to its annual lows against the US dollar," says Thu Lan Nguyen, an analyst at Commerzbank. "That is due to the fact that the market doubts that the Australian central bank might normalise its monetary policy. This approach is excessively pessimistic, as the Australian economy is currently doing well."

Lan Nguyen and the Commerzbank FX team say the RBA is likely to raise its interest rate toward year-end and that this will mean the Australian Dollar also recovers notably around that time.

The AUD/USD rate was quoted 0.28% lower at 0.7378 early in the London morning Thursday but had been as high as 0.7444 during the overnight session, while the Pound-to-Australian-Dollar rate was 0.13% lower at 1.7650. Australia's Dollar was also higher against all other developed market currencies except for the Swiss Franc and Japanese Yen.

"AUD is the stand out performer overnight after a very robust employment report (see AUD). Markets are otherwise directionless in the absence of any meaningful news flow and with no steer from equities (S&P future flat)," says Adam Cole, chief currency strategist at RBC Capital Markets.

Economy: Slowdown in the Cards?

The Westpac-Melbourne Institute Leading Index fell from +0.05% in May to -0.33% during June, according to data released Wednesday, taking the total decline in the index to more than 1% for 2018. The index indicates the likely pace of economic activity relative to trend some three-to-nine months into the future.

"Certainly that below trend profile for the remainder of 2018 and 2019 accords with Westpac’s current growth forecasts," says Bill Evans, chief economist at Westpac. "The biggest drags have come from: a turnaround in the previously positive contribution from the WestpacMI Unemployment Expectations Index (–0.26ppts); reduced support from commodity prices, measured in AUD terms (–0.21ppts); and a deepening contraction in dwelling approvals (–0.2ppts)."

Evans says he and the Westpac team want to see further confirmation of another downward lurch in the leading index before they are happy going on record with suggestions the Australian growth has now shifted onto a below-trend path. "Trend" growth describes the long term average rate of growth seen by an economy. A fall below trend could be indicative of a broader and more sustained economic slowdown.

"With the Bank expecting growth in 2018 and 2019 to be comfortably above trend we assess that the Board’s current expectations for policy are still different to Westpac’s views. We continue to expect that the cash rate will remain on hold throughout both 2018 and 2019," Evans signs off.

Australia's Dollar has fallen by 5.5% against the US Dollar this year and by 3.3% against the Pound as the Aussie interest rate outlook deteriorated, commodity prices weakened and the market's appetite for 'risk currencies' fell in line with an increase in uncertainty over the outlook for international trade.

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