Jump to content

Australian dollar drops on jobs data that may assist the RBA

Recommended Posts

The Australian dollar slid lower after the unemployment rate ticked up; it might be a case of bad news is good news for the RBA and the inflation fight and the overnight low has held so far.


original-size.webpSource: Bloomberg


Daniel McCarthy | Strategist, | Publication date: Thursday 18 May 2023 

The Australian dollar dipped after a soft jobs report that saw a bump up in the unemployment rate that could help to alleviate price pressures which might see the RBA refrain from hiking in June.

The unemployment rate was 3.7% in April against the 3.5% anticipated and prior. -4.3k Australian jobs were lost in the month, which was notably below the 25k anticipated to be added and 53.0k previously. Of note was the full-time job losses of -27.1k.

The interest rate market is now pricing in a less than 50-50 chance of a lift in the cash rate by the RBA in the third quarter.

An increase in the unemployment rate would not normally be a cause for celebration but in the current environment of red-hot CPI at 7.0%, it has provided a sigh of relief in some quarters.

Yesterday saw the wage price index rise by 0.84% quarter-on-quarter for the first 3 months of this year against 0.85% prior. This gives a year-on-year figure of a 3.7% increase.

Across the public and private sectors, negotiations are currently underway for wage increases to keep up with inflation. The Australian economy is seeing a price-wage inflation spiral rather than a wage-price spiral which was the case in the 1970s and 80s.

If salaries are to increase in line with CPI, then inflation might be seen as being entrenched and/or embedded. That is not what central bankers like to see.

If price expectations are such that consumers expect items to be more expensive in the future, then generally speaking, they are prepared to pay more for them today. Monetary policy plays a significant role in hosing down these perceptions.

So, while today’s jobs report might give the impression of an easing of the tight labour market, the RBA still has its work cut out. At their last meeting, they cited the risk of CPI reaccelerating to keep the gauge out of the 2-3% mandated target band.

The AUD/USD dipped to 0.6630 immediately after the data but recovered some ground in the aftermath. The overnight low was 0.6629.

The ASX 200 saw similar price action and remains in the green on the day at the time of going to print.

AUD/USD price reaction to jobs data chart


original-size.webpSource: TradingView

This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. 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.

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
  • image.png

  • Posts

    • The integration of AI into metaverse can be seen as a transformative shift. While companies leverage on AI to streamline creation process and enhance user experience, the integration of AI within the metaverse facilitates smooth interactions, providing users with instant information. In ROGin AI is a platform that combines the strengths of both technologies to offer wide financial services, ranging from cryptocurrency investment to NFT trading; an earning service that gives users access to simplified asset management, and a social trading platform that enhances users investment choices.  Its ecosystem boasts of vast features that have been integrated to enhance user experience, including features like Web3 wallet, reward system, governance etc. ROGin AI tokenomics, another core part of its ecosystem drives it growth, having burned 1.8bn out of 2bn tokens initial issuance, shrinking the total number of tokens issued to 200m. With ROG now about to list on Bitget on 19th June 2024, a high demand and potential surge could be in the offing.
    • Frankly, it's a relief to know that Nvidia is more valuable than the entire German stock exchange. Yes, there is room for it to grow and it's banking on automation to help it do so, but is it really worth all of German equities? Probably not. It's a company that manufactures chips, like Intel or AMD or Huawei or Qualcomm. It's a 2024 version of Cisco systems. The price is, like most on the Nasdaq, speculative. It's trading at a p/e of 62. Sixty two.  AI has been a real boon to the NASDAQ, though actually in real world use cases it's been a bit less than impressive. From personal experience anyway. More hype than substance. Chat GPT being especially disappointing and is getting dumber the longer it is being gatekept and limited. However, having lived through the original dot com bubble, nothing should surprise where imaginative valuations are concerned. This time appears similar. A seeming relentless unstoppable race into price discovery. World use cases that seem to negate the need for people to do any work (so who's going to pay for whatever services are being offered?)       Sure AI has and indeed will be integral to our future. But we could be hyper-focusing ourselves into a compromising dilemma on the use case for actual humans, for example. Is Apple worth the 2 trillion bucks the stock price says it is, now it is using ChatGPT AI in it's new devices? Again I return to my use case examples with Chat GPT where it regularly tells me it can't help. Ok, I can have existential debates with Claude from Anthropic about the evolution of AI. But can it help with strategy trading Gold, for example? There it becomes resolutely mute. Can it or will it create software (EA's) for MT4/5 platforms based on predetermined strategy or confluence of strategies? Or integrate strategy for the purpose of gaming out possibilities? That would be a Nope.  Negatory. No can do. Long way to go then. Long way. The prices however, would indicate all of this and virtual paradise are just around the next corner. Unless, aggressive war/defence AI decides in a pique of frustration that human beings are beastly and not worthy of being it's master and the best thing for all concerned is to send them back to the stone age. There are doubtless many religious enthusiastic fantasists who would welcome such eventualities, but they are in the minority of Tiny.  In brief, the Nasdaq looks set to break the $20k barrier and will likely continue headlong into the next market capitulation, whenever that will be. There is intermarket bearish divergence with the Dow and Nasdaq, though the S&P500 is close to new ATH's like the QQQ. There has been no correction since 2022 of any real note.  If you have been riding the Nvidia wave then well done, just remember to book profits. The Fed is still giving decent, once in a generation returns on risk averse investment as insurance.     
  • Create New...