Danske Bank anticipates that the Australian Dollar (AUD) could experience volatility based on the upcoming labor data scheduled for Thursday morning. With market expectations of employment growth rebounding after July's disappointing numbers, and a 50% chance of another Reserve Bank of Australia (RBA) rate hike during the winter, the data could significantly influence AUD movements.

Key Points:

• High Expectations: Consensus is leaning towards a pick-up in employment numbers after a negative release in July.
• Rate Hike on the Horizon: Markets have priced in nearly a 50% probability for an additional RBA rate hike over the winter months.
• AUD Sensitivity: According to Danske Bank, if the labor data disappoints, it could negatively affect the AUD through the relative rates channel.

Trading Recommendations:

• Stay Alert: Traders should remain vigilant during the data release, as a disappointing print could trigger AUD depreciation.
• Risk Management: Consider hedging strategies to mitigate exposure to potential AUD volatility.

Implications:

For Traders:

• Data-Driven Moves: Short-term trading strategies should account for the possibility of a rapid AUD movement based on the labor data.

For Policymakers:

• Close Monitoring Required: The RBA will likely be watching the labor data closely, as it could influence the bank’s winter rate hike decision.

Conclusion:

The Australian labor market data due on Thursday has the potential to induce volatility in the AUD. The market's anticipation of improved employment figures and a possible RBA rate hike means that any disappointment in the data could weigh down the Australian Dollar. Traders are advised to stay alert and consider risk management options.