Jump to content

Australian Dollar Steady After Jobs Data Adds to RBA Hawkish Stance. Will AUD/USD Rally?

Recommended Posts


  • The Australian Dollar softened slightly after strong jobs numbers
  • Today’s data comes after the RBA signaled a series of rate rises coming
  • A hawkish RBA has been validated. Will more hikes boost AUD/USD?

Australian Dollar Steady After Jobs Data Adds to RBA Hawkish Stance. Will  AUD/USD Rally?

The Australian Dollar held overnight gains after the May unemployment rate came in at 3.9% against 3.8% forecasted and 3.9% previously.

Although the headline rate appears as a small miss, digging into the numbers reveals a rosy outlook for the Australian jobs market. The unemployment rate remains at its lowest in 50-years.

The overall change in employment for the month was 60.6k instead of 25.0k anticipated. Full time employment increased a whopping 69.4k, while 8.7k part time jobs were lost in May.

The participation rate jumped up to 66.7% from 66.3% prior and higher than the 66.4% estimated. This explains the slight increase in the unemployment rate even though more jobs were added.

Today’s data reiterates that the RBA has plenty of scope to rein in damaging inflation. RBA Governor Philip Lowe has made it clear, in no uncertain terms, that aggressive rate hikes are coming.

Speaking on the Australian Broadcasting Corporation (ABC) on Tuesday night, he specifically said that when it comes to inflation, the bank will do “whatever it takes.”

Seemingly channeling former ECB President Mario Draghi, except that instead of promoting recklessly loose policy, Mr. Lowe is taking his job seriously as a central banker.

Mr. Lowe said that Australians need to prepare for higher interest rates and that it is reasonable to assume that the cash could get to 2.5% by the end of the year, the mid-point of the mandated 2-3% target band. He said that inflation could hit 7% later this year.

Yesterday, the Australian government announced that the minimum wage will rise by 5.2%, 0.1% above the latest inflation print of 5.1%. It is welcome news for minimum wage workers, but it is a headache for monetary policy managers trying to stare down inflation.

So, with wages rising, Mr. Lowe’s messaging is understandable. When it comes to the previously loose stance, he justified the hawkish outlook by recognising that the emergency is over and it’s time to remove the emergency policy settings.

His commentary saw AUD/USD make some gains, but it was the reaction to the Federal Open Market Committee (FOMC) meeting 8-hours earlier than today's data that lit up Aussie bulls while the US Dollar sank.



Chart created in TradingView

The Fed raised rates by 75 basis-points as most had expected. It was the language of Fed Chair Jerome Powell that appeared to be less hawkish looking forward than the market had been looking for.

He said that the next meeting in July is likely to see a debate for a 50 or 75 basis point increase. With the latest inflation read at an ‘eye watering’ 8.6% year-on year, his stance disappointed Treasury markets with yields dipping across the curve, which undermined USD.

This picture has an RBA becoming more hawkish at a time when the Fed has stepped back from being too much that way. AUD/USD may find support once the market digests the strength of the jobs market.

--- Written by Daniel McCarthy, Strategist for DailyFX.com. 16th June 2022

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
    • Total Posts
    • Total Members
    • Most Online
      10/06/21 10:53

    Newest Member
    Joined 21/09/23 07:54
  • Posts

    • I think it comes down to marketing, community managedment, and events + ofcourse a neat interface with awesome features
    • Thats a nice wallet too, im checking this list of hardware wallets however, i cant decide if it should be air gapped or a ledger type..
    • The US dollar rose after the US Federal Reserve kept its interest rates in the current 5.25%-5.50% range on Wednesday night and chair, Jerome Powell, delivered his firm hawkish stance - higher for longer.    Angela Barnes | Financial presenter/producer, London | Publication date: Thursday 21 September 2023 09:55 Updated quarterly projections show the central bank may still lift rates one more time this year to a peak 5.50%-5.75% range. Policymakers now see the fight against inflation lasting into 2026. IGTV’s Angela Barnes has more. The Federal Reserve The Federal Reserve announced that they would be keeping interest rates in the U.S. unchanged at a range of 5.25 to 5.50 percent. This decision had a big impact on the value of the U.S. dollar. One interesting thing to note is that Jerome Powell, who heads the Federal Reserve, took a firm stance on raising rates, which caused the value of the dollar to go up. The Federal Reserve also released their updated projections, which suggest that there may be one more rate hike this year, bringing the rate to a range of 5.50 to 5.75 percent. U.S. inflation They also predict a half percentage rate cut in 2020-24, which is different from their previous expectation of a one percent cut next year. The Fed officials believe that they can continue to fight inflation until 2026 without causing any harm to the economy. As a result of these announcements, bond yields, which are the returns on bonds, increased. The two-year Treasury note even reached a level not seen in 17 years. This caused a decline in the equity markets, as investors moved their money into bonds. The U.S. dollar At the same time, the USD became stronger and reached a six-month high. This had an impact on the dollar-yen exchange rate, which reached its highest level in 2023. Overall, these developments indicate that the U.S. dollar is doing well and is expected to continue to strengthen. This is important for traders to keep an eye on, as it can impact the value of other currencies and international trade. It will be interesting to see how the markets react in the coming days.     This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
  • Create New...