Modest Miss in Jobs Data Causes AUD to Slip, Pound Boosted

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The Australian Dollar slightly dipped due to the higher than the anticipated unemployment rate of 3.5 per cent, 0.1 per cent higher than the previous and expected. The slight dip boosted the pound sterling.

The Australian Bureau of Statistics (ABS) reported lower employment in December, with only 14,600, as compared to 58,200 in the previous month, and lower than the forecasted jobs of 25,000. Participation also slid by 0.2 per cent to 66.6 per cent.

Elsa Lignos, managing director at RBC Capital Markets, said, “AUD is the underperformer after an unexpected fall in employment.” The slight dip in AUD boosted GBP by almost 0.5 per cent, rising to 1.78740. AUD was also down by 0.5 per cent against USD, at 0.6905, and 0.6 per cent against the Euro, at 1.5644.

According to Daniel McCarthy, strategist at DailyFX, “Although a small miss, the unemployment rate continues to linger near multi-generational lows. Today’s numbers show that the labour market remains robust despite the Reserve Bank of Australia lifting the cash rate by 3 per cent from the pandemic emergency low. The bank has stepped back large rate hikes, and the futures market has a 50-50 chance of a 25 basis-point hike priced in for their February 7th monetary policy meeting.”

Economists also predict that a slowing in the RBA’s rate hike cycle may hinder the support AUD may get from the interest rate channel. However, ANZ economists foresee that the miss in the jobs data is just a one-off.

“Our view that the labour market will remain very tight over 2023 has not changed. With 444,200 job vacancies recorded in November, around double the pre-pandemic level and businesses still in hiring mode, it’s hard to see a sharp rise in unemployment any time soon,” says ANZ senior economist Cathy Birch.

However, according to Lignos, the AUD drop may have been caused by global conditions instead of domestic reasons. She added that NZD is also showing a similar trend.

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