Australian Dollar Steadies on Jobs Data While China Slows. Where to for AUD/USD?
Australian Dollar, AUD/USD, US Dollar, Unemployment, RBA, China, Fed – Talking Points
- The Australian Dollar recovered some lost ground on strong jobs numbers
- The RBA meeting has taken on a new light with signs the economy remains hot
- The Fed and China have also been chiming in on AUD/USD
The Australian Dollar reversed early losses on Thursday after a solid jobs report that saw a dip in the unemployment rate which could reignite price pressures that might see the RBA’s July meeting become a little more interesting.
The unemployment rate was 3.6% in May against the 3.7% anticipated and prior. 75.9k Australian jobs were added in the month, which was notably above the 17.5k expected to be added and -4.3k previously.
Of note was the full-time boost of 61.7k and the nudge higher in the participation rate to 66.9% from 66.7%.
The RBA hiked rates by 25 basis points (bp) earlier this month to 4.10%. Before today’s numbers, the overnight index swaps (OIS) market ascribed about a 20% chance of a hike in the cash rate by the RBA at its July monetary policy meeting. They now see a bit over 40% probability of a 25 bp lift.
For the Aussie Dollar though, the robust domestic data was offset to an extent by weak Chinese numbers. Year-to-date industrial production was 3.6% to the end of May rather than the 3.9% anticipated, although the year-on-year figure was in line at 3.5%.
Retail sales year-on-year were 12.7%, missing estimates of 13.7% and 18.4% prior. Fixed-asset investment growth was 4% year to date, weaker than forecasts of 4.4%. The surveyed unemployment rate in urban areas was unchanged at 5.2% as expected.
On Tuesday, the People’s Bank of China (PBOC) gave markets a slight boost when they cut the 7-day reverse repo rate from 2% to 1.9%. Then today they cut the rate on the 1-year medium-term lending facility to 2.65% from 2.75%.
The sluggish economic performance of the world’s second-largest economy has led to speculation of further stimulus measures from Beijing.
Looking ahead, the factors that may play a role in AUD direction could be the pricing of an RBA rate move, Fed speak around more hikes and the economic outlook for China if there is a notable change in policy there.
AUD/USD PRICE REACTION TO JOBS, THE FED DECISION AND CHINA DATA
--- Written by Daniel McCarthy, Strategist for DailyFX.com
Please contact Daniel via @DanMcCathyFX on Twitter
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.