24 January, 2019
The Australian Bureau of Statistics is scheduled to release a series of employment data on Wednesday at 19:30 EST (or on Thursday at 01:30 CET), which can move the markets if it subverts expectations. Here are a few things to keep in mind ahead of this data if you are trading any AUD pairs.
There are three key bits of data that are released simultaneously, but the one that gets the most focus is the rate itself. This is seasonally adjusted data, which is relevant considering the large agricultural base in Australia.
Unlike the Fed, the RBA doesn’t have a mandate to keep unemployment low. However, employment rates can have implications for inflation, which is something the notoriously conservative central bank is concerned about.
So, even though the employment rate is one of the key data points of the monthly economic calendar, its impact on the currency is mostly indirect in the form of helping to form expectations of future inflation and economic trends.
One of the important factors relevant to Australia, in particular, is that as the unemployment rate drops to its structural level, it becomes increasingly harder for businesses to find employees, which can impact their productivity. This also causes salaries to rise, and the subsequent increased demand can translate into inflation. Australia’s CPI has been hovering close to the 2% target since January of 2017, keeping the RBA quite happy in this regard.
However, during that period, the unemployment rate has been dropping, reaching a bottom of 5.0% in October. Where exactly the structural level is, is a matter of debate among economists, but there is a consensus that it’s somewhere between 4-6% depending on circumstances, and with unemployment in the current range, policymakers might be keeping a close eye on potential inflationary implications.
November’s unemployment rate came in at 5.1%, a tick up from the six-and-half year low of 5.0% registered during the two months prior. This happened despite employment increasing by 37K, well above market expectations of 20K, indicating that the unemployment trend is being driven more by demand for jobs than any underlying weakness in job creation.
Current expectations are for the rate to remain at 5.1% as registered in the prior month. It should be noted that the RBA expected that unemployment would reach 5.5% by the end of the year, but their assessment was that it would fall to that rate. The economy has, therefore, exceeded their expectations. In their latest statement, they project unemployment to reach 4.75% by the end of next year.
Participation rate: The labor force participation rate has remained pretty steady for the last year, just fluctuating between 65.5% and 65.8%. November saw an uptick in the participation rate from 65.5% to 65.7%, explaining the increase in the unemployment rate. Expectations are for the rate to stay steady at 65.7%
Employment change: This is the number of jobs created during the month, and is helpful to understand if changes in the unemployment rate are driven because of a change in the number of jobs, or the number of people seeking jobs. The data for November, as mentioned, caught the market by surprize on the positive side. Consensus expectations are less exuberant than last time, with 16.5K jobs created during December.
The AUDUSD has had some trouble gaining momentum for a retracement back to last year’s highs after bouncing off the 0.7050 three times in a row. It didn’t even make it back to the first Fibo level. Conversely, it seems to be in the process of forming another downward trend channel with the same amplitude and angle as the channel it followed down last year: [audusd]
We still have support at 0.7050, but will it hold again? On the other hand, if it makes another run higher, then we have resistance at 0.7450.
Yesterday was not great for the Fed as the latest US data added to fears of a growth slowdown. December Retail Sales fell 1.2% over the month, wildly...
The services sector in the United States expanded at a slower pace in January. The Institute of Supply Management's non-manufacturing PMI...
The Eurozone's economy got off to a sluggish start in 2019. Latest forward-looking indicators showed as some of the Eurozone's major economies...
Alongside the weaker than anticipated GDP print released yesterday, GBP was weighed down by data which showed a widening of the UK trade...
The latest unemployment report from New Zealand showed a disappointing performance from the labor market for the period. Data released...
Traders will be hoping for some positive headlines this week around the ongoing US/China trade talks, following the disappointing announcement...
The week ahead will see the RBNZ holding its monetary policy meeting. Interest rates in New Zealand should remain unchanged at this week's meeting...
We could have some volatility in NZD pairs coming up on Wednesday at 20:45 CET (or 14:45 CET) with the release of a series of unemployment...
The latest monthly jobs report from the United States showed that the economy posted a steady pace of job growth during January. The data comes...