Positive employment data to support AUD outperformance vs. EUR amid broad USD strength

The only notable domestic data release is the employment report on Thursday. A rebound is expected in October employment of 20K given forward indicators of hiring remains positive. The unemployment rate is expected to tick down to 6.1%, from 6.2% in September. The outcome should reinforce the RBA's recent decision to keep the cash rate unchanged at 2%. The decision suggests that signs of stronger growth have outweighed the shock of near-record low underlying inflation in Q3. 

Indeed, business surveys show business conditions at their strongest level in years, while a rebound in bulk commodity exports looks to have added a substantial 0.8pp to Q3 GDP. Although Fed normalization and commodity price pressures related to China's slowdown are still likely to drag AUDUSD lower, the near-term rebound in domestic business conditions in Australia could provide some relative support for the currency. 

This week's Chinese activity data, which are likely to show some short-term stabilization, may not provide the catalyst for immediate AUD underperformance. As such, EUR underperformance relative to the AUD should extend as we draw closer to the December FOMC meeting where a hike is a "live possibility"