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Australian Dollar Up as Job Creation Surges Again, But Full-Time Roles Fall

Australian Dollar Up as Job Creation Surges Again, But Full-Time Roles Fall

2020-01-23 00:35:00
David Cottle, Analyst
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Australian Dollar, Official Employment Data, Talking Points:

  • Australian job creation smashed forecasts once again
  • Nearly 30,000 new positions were filled in December
  • However, they were all part-time. Full time roles slipped back

Join our analysts for live, interactive coverage of all major economic data at the DailyFX Webinars. We’d love to have you along.

The Australian Dollar got a lift Thursday on news that job creation once again smashed forecasts. However, there was a considerable devil in the detail. Part-time rolls accounted for all of the rise.

The economy added 29,800 new jobs in December, the figures showed. That made a mockery of 11,000 markets expected and came after a very strong November. Even so, full-time employment fell by 300 positions, leaving part time roles’ 29,200 rise to keep the headline so bullish.

The unemployment rate slipped back to 5.1% from 5.2%, but the Reserve Bank of Australia’s hope that it will get down to 4.5% still looks like a big ask so late in the cycle.

Will this figure be enough to keep a February interest rate cut off the table? The market certainly seems to think so, bidding AUD/USD sharply higher after the figures.

Australian Dollar Vs US Dolalr, 5-Minute Chart

However, while the headline number was undoubtedly punchy, its skew toward part-time work may not have shut the door to lower rates quite as conclusively as the market thinks.

According to index provider ASX the market is betting on a reduction in record-low Australian interest rates when the RBA makes its first monetary policy decision of 2020 on February 4. The chance of a cut in the Official Cash Rate is now seen as 58% and it will be fascinating to see how this changes in the coming days as investors mull these numbers.

AUD/USD BEARISH
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Change in Longs Shorts OI
Daily -4% -28% -10%
Weekly 6% -19% -1%
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On its daily chart the Australian Dollar remains weakened by the general withdrawal from growth-correlated assets which has accompanied the spread of the so-called Wuhan strain of coronavirus. This respiratory illness has caused deaths and spread from the Chinese city where it was first recorded as far as Japan and the United States.

Australian Dollar Vs US Dollar, Daily Chart

China has taken steps to quarantine Wuhan, but movements related to Chinese New Year celebrations at the weekend will already have seen many people on the move, both within China and beyond. The outbreak inevitably draws comparison with 2003’s Severe Acute Respiratory Syndrome (SARS) epidemic, which caused widespread economic disruption in Southeast Asia.

The story has taken some of the Aussie-supporting shine off risk appetite engendered by this month trade deal signature between China and the US. Still, the latest data show that the Australian economy is resilient and still creating jobs at a remarkable pace.

The RBA may not be entirely depressed by the Aussie’s current weakness either. A weaker currency should help with import inflation which the country will need if its stickily low prices are ever to rise sustainably back to target.

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--- Written by David Cottle, DailyFX Research

Follow David on Twitter@DavidCottleFX or use the Comments section below to get in touch!

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