Stronger jobs data boosts AUDUSD

Earlier this week we spoke about the scrutiny that today’s Australian labour force data for December would receive as well as its importance to the future direction of the AUDUSD and RBA cash rate. We also highlighted the misgivings of respected economic journalist Ross Gittins, shared by many others who believe additional RBA rate cuts will do more harm than good. Today’s labour market data has temporarily put that debate on hold with the headline employment figures much better than consensus expectation. 28.9k new jobs were created in December vs expectations of 15k. The unemployment rate, the measure of labour market health I most closely follow, fell to 5.1% vs expectations of 5.2%.

Earlier this week we spoke about the scrutiny that today’s Australian labour force data for December would receive as well as its importance to the future direction of the AUDUSD and RBA cash rate. We also highlighted the misgivings of respected economic journalist Ross Gittins, shared by many others who believe additional RBA rate cuts will do more harm than good.

Today’s labour market data has temporarily put that debate on hold with the headline employment figures much better than consensus expectation. 28.9k new jobs were created in December vs expectations of 15k. The unemployment rate, the measure of labour market health I most closely follow, fell to 5.1% vs expectations of 5.2%.

Notably, the unemployment rate finished 2019 below the RBA’s own forecast of 5.2% and below its assessment from the December board meeting “The unemployment rate has been steady at around 5¼ percent over recent months. It is expected to remain around this level for some time….”

However, the details within the report were less impressive. A 29.2k increase in part-time jobs masked a small fall (300) in full-time jobs. A trend has been in place for some months now and has resulted in 51.k rise in part-time jobs since September while in the same period time full-time jobs have fallen by 8.0k.

Nonetheless, the resilience of the labour market has already seen a number of banks and the market unwind expectations for a February RBA cut. After being almost 60% priced earlier this week, the strong jobs report, the rise in housing sentiment in yesterday's consumer confidence index combined with the AUDUSD sitting contently below .70c has left just 25% of a rate cut priced for the February RBA meeting. A full rate cut is not priced until August 2020.

Pre the number, the AUDUSD was holding just above key support .6830 and has since recovered to be trading back near .6875. Because news on the Coronavirus is likely to get worse before it gets better, the AUDUSD is likely to be capped in the short term by the band of resistance .6880/00 that includes the 200 day ma (.6882) and the September high at .6895.

Source Tradingview. The figures stated areas of the 23rd of January 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

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