By Rob Samson

The Australian Dollar (AUD) was dealt a rude surprise on Thursday with the release of some below-par employment numbers.

The weakness in the Aus dollar on Thursday is one of the highlights of the currency markes; after a great run of late markets have once again got cold feed on the currency. This leads us to believe that perhaps the recent rally was nothing of a short squeeze after all.

A look at the Australian dollar exchange rate complex shows:

The pound sterling to Australian dollar exchange rate is a percent higher at 1.8575.The euro to Australian dollar exchange rate is 1.07 pct higher at 1.5224.The Australian dollar to New Zealand dollar rate is 0.85 pct lower at 1.0757.The Australian dollar to US dollar exchange rate is 0.8 pct lower at 0.8955.BE AWARE: All AUD quotes are taken from the wholesale inter-bank markets. Your bank will affix a spread to the rate at their discretion when passing on a retail rate. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering more currency. Please learn more here.

Labour Market Data Dishes Up a Rude Surprise

Today’s labour force report for January was much weaker than market expectations for the second consecutive month. The unemployment rate rose to 6.0% which is the highest for a decade and above the peak reached during the global financial crisis.

Employment also continued to decline. Full-time employment fell further among both males and females suggesting broader weakness in the labour market than just in mining and related sectors.

"The ongoing weakness in the labour force report has surprised us and is difficult to reconcile with a range of other indicators," says Justin Fabo at ANZ Research, "our forecasts have the unemployment rate peaking around 6% but that has been achieved quicker than expected. We remain of the view that employment outcomes will gradually improve in coming months but certainly it is taking longer than we thought."

The selling of Aus dollar exchange rates tells us that many market participants are now unsure that the Reserve Bank of Australia can afford to retain its policy of keeping interest rates at current levels in 2014.

However, Boris Schlossberg at BK Asset Management believes that it will take a great deal more to sway the RBA:

"As many analysts have pointed out the report today is unlikely to have an impact on RBA's monetary policy. The central bank has built in the prospect of 6.2% peak in unemployment into its model, and unless conditions worsen materially the RBA is likely to maintain its neutral bias."

As these forecasts from Barclays show the risks remain skewed to the downside going forward.

Markets ease back, further pressuring Aus dollar

The AUS dollar and the rest of the currency complex will find added pressure from the negative tone to trading being witnessed on Thursday.

Eropean equities followed Asia and Australia and eased on the open as the bullish momentum wanes.

"A stellar run over the last few days has seen the buyers run out of steam and those of a shorter term nature will be looking to book profits. Despite the modest pull back though, bulls should still be feeling fairly confident in their convictions what with members of the ECB, BoE and Fed all coming out with dovish comments this week keeping one of the main pillars of the rally well underpinned," says Jonothan Sudari at Capital Spreads.

Following yesterday’s comments from the ECB’s Coeure that negative deposit rates were a real possibility, traders will be looking to today’s ECB monthly bulletin to step up the dovishness a notch from the usual “accommodative stance of monetary policy for as long as necessary”.

The renewed optimism regarding the US economic growth was overshadowed yesterday by some disappointing corporate earnings especially coming from brand names like Procter & Gamble and Amazon. It was enough to keep the Dow at arms’ length, closing a mere 7 points down at 15,973. Meanwhile, some light profit taking has put global equities on the back foot in overnight trading.