Soft Labour Market Figures Take A Toll On The Aussie Dollar, But Kiwi Remains Unscathed After Ardern’s Departure

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The Australian dollar experienced a sharp decline due to the inability of investors to ignore their fears of an impending US recession and weak local employment figures. 

On the other hand, news about Prime Minister Jacinda Ardern’s resignation had minimal impact on New Zealand’s currency (the kiwi).

The Australian Dollar dropped 0.4% to its weakest rate in a week, settling at $0.6910 after reaching an impressive five-month peak of $0.7064.

Resistance to further price increases is currently hovering around 70 cents as the 14-day moving average support level sits at a steady $0.6889.

“The current soft labour market data is putting a lid on the Aussie dollar’s appreciation,” said one analyst. “Investors are becoming increasingly cautious about Australian economic prospects and could be reluctant to fuel the currency’s gains further.”

Meanwhile, the New Zealand Dollar remained relatively unscathed following news of Prime Minister Ardern’s resignation earlier this week.

The kiwi slipped 0.2%, settling at $0.6428, after reaching a seven-month peak of $$0.6530 earlier on in the day. This news didn’t affect much back when Prime Minister Jacinda Ardern announced her resignation for next month as it found support at $0.6360 and continued to stabilise regardless of the announcement made by the PM herself.

“The local currency appears to have shrugged off the news and helped NZDUSD hold its ground,” said an economist from a leading financial institution in New Zealand.

The US economy appears to be heading towards a recession. The most recent data reveals that retail sales had seen their most significant drop in the past year while manufacturing output decreased by an astounding amount with nearly two years of record. These worrisome developments are fanning fears about how long this dismal trend will continue.

The investors’ return to the safe-haven dollar and bonds pushed futures markets to price in rate cuts from the Federal Reserve by late this year, once the Fed Funds Rate reaches its apex of 4.85% during June.

Market experts anticipate the Fed to decrease their rate increase in February by 25 basis points as inflation softens following a reduction of increases just last December. On top of that, various policymakers have made it clear they intend to continue raising interest rates, with several recommending an upper limit policy rate of at least 5%.

Australia’s employment numbers crashed in December, signalling a risk-off mood and weighing on the Aussie. As a result, three-year bond futures skyrocketed 20 ticks to 97 with an implied yield of 3.0%. The securities last traded at 94.97 before market close.

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