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The Australian Dollar should be flying in the wake of better-than-expected jobs market numbers, but the currency is a distinct underperformer, most likely owing to a bad day for Chinese stock markets and a broader U.S. Dollar rebound.

In fact, the Aussie Dollar was softer against all its major peers - apart from fellow antipodean, the New Zealand Dollar - on the day Australia printed some strong labour market figures.

Australia added 55K jobs in October, which more than doubles the market expectation for an increase of 20K and represents a solid recovery from September's tepid 7.8K.

Elsewhere, the participation rate of those able to work rose to its highest levels since the Second World War amidst surging immigration.

The numbers suggest Australia's jobs market remains in fine fettle and that the impact of previous Reserve Bank of Australia (RBA) rate hikes is being absorbed without maximal economic damage.

If this is the case, then the odds of further RBA rate hikes remain non-negligible, which can support Australian bond yields relative to elsewhere and help the Australian Dollar.

Yet the Australian Dollar is an underperformer on the same day these labour market data are presented, suggesting the global backdrop continues to maintain an overwhelming stranglehold on the currency.

Above: "Australia labour force participation returns to a post-WWI record high as immigration surges" - Westpac.

The Pound to Australian Dollar exchange rate is higher on the day at 1.91, the Euro to Australian Dollar is higher at 1.6730, and the Australian Dollar to U.S. Dollar is lower by 0.40% at 0.6482.

"Firm jobs data largely ignored, but RBA hike still a risk. The US dollar pullback probably has further to run, setting up AUD for a probe of 0.6580/0.6600," says a strategy note from Westpac.

A U.S. dollar rebound over the past 24 hours has a hand in broader Australian Dollar underperformance, even against the European currencies, which are withstanding Dollar strength to a greater degree.

But it is probably China where the main impetus for the softer Aussie Dollar lies, as we note Chinese stocks have fallen quite sharply on Thursday.

The Chinese stock underperformance is idiosyncratic in nature and, therefore, will likely have a greater impact on China-linked assets and proxies, such as the Australian Dollar.

According to Sean Callow, a currency strategist at Westpac in Sydney, China will be crucial to Australian Dollar performance into year-end.

"A year ago, there was an even larger AUD/USD rise on a softer than expected October US CPI report, with the Aussie rally continuing strongly into January 2023. At that time, China sentiment improved sharply as the ‘zero Covid’ policy was scrapped, a strong tailwind for the A$," he explains.

Can China offer that same tailwind this year?

Unlikely, says Callow, "it is hard to see a similar rally in coming weeks, given the cool investor response to China’s fiscal stimulus measures and ongoing concern over property sector stress."