Aussie Firms as Jobless Rate Dive Encourages Rate Hike Bets
The Australian Dollar is bouncing higher for a second session early Thursday, helped by a weaker U.S. Dollar and positive domestic labor market data.
The Aussie rose on Wednesday after the U.S. Dollar weakened, with U.S. Treasury yields retreating as well after hitting roughly two-year peaks on 2-year and 10-year notes. Nonetheless, the greenback remains well-supported as investors prepared for a widely expected interest rate increase in March.
U.S. 10-year Treasury yields touched a new two-year high of 1.902% on Wednesday, but was last down 4 basis points at 1.8271%.
At 02:37 GMT, the AUD/USD is trading .7234, up 0.0022 or +0.30%. On Wednesday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $71.68, up $0.46 or +0.65%.
Australia Jobless Number Plunges to 14 Year Low as Case Builds for Rate Hike
Australian employment raced ahead in December as the jobless rate fell to its lowest point since 2008, showing strength that should help the economy weather the current surge in coronavirus cases across the country, Reuters reported.
Data from the Australian Bureau of Statistics (ABS) on Thursday showed employment jumped 64,800 in December, topping market forecasts of a 43,300 rise and adding to November’s record jump of 366,000.
The unemployment rate fell to 4.2%, from 4.6% in November, the lowest reading since August 2008, when the jobless rate bottomed out at 4%. The ABS noted that to find a result under 4% you needed to go back to the 1970s.
Short-Term Outlook: Focus on Possible RBA Rate Hike
Investors reacted to the robust jobs report by pushing the AUD/USD up to .7257 on wagers of an early rate increase from the Reserve Bank of Australia (RBA), which has been seeking to drive unemployment to 4% or lower to lift wage growth after years of sub-par gains.
Official data on wages for the fourth quarter are not out until February 23 and may not show much of a pick-up given the inertia baked into the pay system in Australia.
The last measure of wages showed growth of just 2.2% a year. This is the key reason the RBA has argued that interest rates will not need to rise from their record low of 0.1% until 2023. However, financial market traders are wagering a tightening will come a lot sooner, perhaps as early as May given the persistence of global inflationary pressures.
Meanwhile, data on Australian consumer prices for the December quarter is due next week and some economists are predicting core inflation could jump to its highest since 2009 at 2.5%, adding greatly to the case for an early rise in rates.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
