Has the Aussie economy hit the sweet spot?

- Aussie jobs data leads to speculation that RBA tightening bias could be re-emphasized in coming months: (AU APRIL EMPLOYMENT CHANGE: 49.6K V 12.5K expected; UNEMPLOYMENT RATE: 4.4% V 4.5% expected; Full-time employment +11.6K, part-time employment +38.0K; Prior employment change revised to 5.2K from 10.5K prior) The AUD/USD managed to break through 0.8300 on the back of the data. Strong jobs growth, combined with capacity utilization going higher, means the risks to further wage acceleration remain real. But we are yet to see tight labor market conditions translate into wage pressures, and it seems the Aussie economy has hit the sweet spot of strong growth with low wage inflation. The jobs data seems to confirm the idea that Australia is an expansionary economy, and if you couple tonight's jobs data with a pro-cyclical budget, we could see the tightening bias being re-emphasized in coming months.

- Forex: The USD held steady against the European currencies and the JPY after the Fed statement. Some market participants will likely view the Fed's acknowledgment of the recent slowdown in economic activity as a "baby step" toward an eventual interest rate cut. But the main message for forex markets seems to be that the Fed didn't have greater acknowledgment of the slow first quarter growth. The Fed continues to believe that the economy is going to grow faster, and that the drag from housing will decrease (that's why they continue to be focused on inflation). The JPY was little changed in Asia on few catalysts (BoJ members reiterated prior commentary). In the moments after the Fed statement the CAD strengthened against a basket of currencies, and managed to trade in a tight range in Asia. The key focus for the CAD remains the jobs data at the end of the week, with many analysts suggesting that the trend of 50,000 jobs a month is probably unsustainable. The NZD failed to gain inspiration from an AUD rally, with recent Kiwi data painting a picture of a slowing economy. The NZD/USD continues to be undermined by active selling of the NZD against the AUD on the back of strong Aussie economic data, but the NZD remains well supported ahead of a rumored NZ$500M Uridashi bond in the next few days.

- Equities: The Nikkei225 was unable to hold on to gains, and is currently little changed. Gains in banks, property developers and Nippon Steel were offset by a decline in shares of Toyota (following its earnings report). The Kospi index is trading near a new all-time high (above the psychological 1,600 level) on gains in shipbuilders and Posco Steel (M&A talk resurfaces). The ASX200 is lower by more than 0.1% on declines in shares of Rio Tinto (both BHP and Rio declined to comment on speculation). Other losers down under include Coles Group (Tesco will no longer bid for the company) and National Australia Bank (profit-taking after good earnings result). Shares in Hong Kong are lower on declines in shares of China Mobile and HSBC. Chinese stocks continue to defy gravity as retail investors push indices to new record highs.

- Commodities: Crude oil is currently trading at $61.70 on stronger than expected weekly U.S. crude and gasoline inventories. Spot gold is lower by more than 0.75%, as the USD gained on the FOMC statement. Shanghai Copper is lower on profit-taking and rising stockpiles. Copper stockpiles at the Shanghai Futures Exchange have more than doubled this year to the highest level since December of 2005.