Big AU jobs print impacts ASX200

In Tuesday's article on the AUDUSD, the risk of higher volatility from today’s Tier 1 data doubleheader - the FOMC meeting and the release of August Labour Force data for the Australian economy was noted.

Charts (4)

While the FOMC meeting came and went mostly as expected, it’s been a different story following the release of Australia jobs data that was so far beyond consensus expectations, some mild scepticism could be excused.

Due to the ongoing lockdown in Victoria and July’s +114.7k increase in jobs, the expectation heading into today’s jobs data was for a -40k fall in jobs. Although pointed out in Tuesday’s article because of the methodology variation between the payroll and ABS survey measures, a +40k print wouldn’t have surprised either.

To settle the argument, it was suggested to focus on the unemployment rate, that was expected to increase from 7.5% to 7.7%, its highest level since 1998.

In an unexpected twist, employment increased by another +111k in August and the unemployment rate dropped from 7.5% to 6.8%!

Taking some gloss off the headline number, part-time jobs accounted for +74.8k of today's gains. Nonetheless, many of the jobs lost during April and Mays lockdown appear to have returned.

The implications of this are that the Australian economy continues to do better expected, and with households sitting on a large pile of savings, it reduces the urgency for the RBA to consider and implement “further monetary measures” it mentioned in its last Board meeting.

The prospect of less stimulus from the RBA hasn’t been particularly well received by the ASX200, already on the back foot this morning, with iron ores 10% pullback from recent highs weighing on the big miners.

Not helping either, a sell-down in U.S equity futures as hopes of a 4th U.S. stimulus package before the November 4th election, continue to recede.

Technically, the ASX200 remains within a range between 6200 and 5800/5700, a range that has been in place since early June. Should todays sell-off continue, the preference is for the ASX200 to again find support at the bottom of the range, before a recovery towards 6600 into year-end.

Keeping in mind, should the ASX200 see a sustained break below 5700, the initial downside projection is 5400.

Big AU jobs print impacts ASX200 

Source Tradingview. The figures stated areas of the 17th of September 2020. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.