Aussie Employment Takes a Breather – AUD Exchange Rates Slip
The Australian Dollar to New Zealand Dollar (AUD/NZD) exchange rate slipped slightly on Thursday, falling as markets responded to some mixed Australian employment readings and a below-forecast Australian consumer inflation report.
In respect to the good; Australia added 16,000 jobs in January against the forecast of 15,000, whilst the unemployment rate fell to 5.5%, down from the previous period’s upwardly revised 5.6% print.
In respect to the bad, however, full-time jobs in Australia dropped by 49,800 in January, the first decline since September, with the participation rate falling to 65.6% – consistent with forecasts.
So, what does this mean for the Australian economy?
Ultimately these readings demonstrate continued (if ebbing) strength; Australia’s labour market took a bit of a breather in this period after last year’s massive, 400,000 job surge and it looks like some slack still remains in the market.
It could also be that business reluctance to increase costs might, in turn, weigh on wage growth, which could keep inflation tepid – though markets will have to wait until next week for the wage figures to be sure.
Paul Dales of Capital Economics shared his thoughts on this subject:
‘While the continued strength of the labour market will support consumption growth this year, without much more wage inflation the RBA isn’t going to raise interest rates’.
In other news, the Melbourne Institute’s Australian consumer inflation expectation reading for the next 12 months slipped from 3.7% to 3.6%, adding to concerns that the Reserve Bank of Australia (RBA) could be a long way away from a hawkish policy move.
NZD Exchange Rates Up on Rise in RBNZ 2-Year Inflation Expectations
The New Zealand Dollar extended its gains on Thursday as markets continued to digest the recent Reserve Bank of New Zealand (RBNZ) 2-year inflation expectation report.
The latest quarterly survey revealed a rise in expectations for growing consumer prices, with predicted growth rising from 2.02% to 2.11%.
Whilst this rise was rather mild it could still prove pertinent in that the RBNZ is known to factor in this report when planning monetary policy.
It should also be stressed, however, that the RBNZ is not expected to raise interest rates until the second half of 2019, with Grant Spencer, Governor of the central bank citing numerous uncertainties at the recent monetary policy meeting:
‘Monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain and policy may need to adjust accordingly’.
Nonetheless, this news proved effective in bolstering the ‘Kiwi’ Dollar.
AUD/NZD Exchange Rate Forecast: RBA Lowe Testimony and NZ Manufacturing PMI Ahead
The Australian Dollar New Zealand Dollar (AUD/NZD) exchange rate could see some volatility this evening as markets respond to New Zealand’s manufacturing PMI report for January and RBA Governor Philip Lowe’s testimony to the House of Representatives’ Standing Committee on Economics in Sydney.
Lowe’s words with the governing body could reveal some clues as to the RBA’s plans moving forward, though if his comments on the 8th of February are anything to go by then he could simply reiterate expectations for gradual progress in reducing the jobless rate, and having inflation return to target levels.
Another possible driver will be today’s run of US data readings, with the US jobless claims figure and the Philadelphia Fed business outlook liable to put the ‘Aussie’ Dollar under pressure if they prompt a surge in demand for the US Dollar (USD).