Aussie Dollar Recovers Following Mixed Unemployment Data

Australian One Dollar Coins over Black
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The Aussie dollar edged back up overnight after falling slightly on the back of mixed unemployment data.

The AUD finished lower on $0.733 at the close of Thursday trade. As of 10am Friday AEST, the local currency had improved marginally, trading at $0.7345 against the greenback.

Meanwhile, the dollar is trending up against other major currencies too. In early Friday trade the Aussie is buying $0.6729 euro cents. That’s up from $0.6716 on Thursday.

The dollar also rose against the Japanese currency, buying 91.59 yen at 10am AEST. That represents a marginal gain since yesterday, when the dollar bough 91.61 yen at the close of trade.

There’s not much we can read into from these movements. The AUD’s 24-hour trend against other currencies is in line with expectations.

The big talking point on markets was the unemployment figures released on Thursday morning. But the mixed data had no lasting impact on the value of the dollar.

The AUD received an initial boost on figures showing the economy added 38,500 jobs in July. That was up from 7,000 for the month of June. That headline news prompted some early optimism about the direction of the economy.

But it didn’t last long.

Despite the uptick in jobs creation, the unemployment rate still went up to 6.3%. That was due to a 0.3% rise in the number of jobseekers in the market.

Westpac’s currency strategist, Richard Franulovich, said the markets caught on quickly. He says they turned once it became clear the figures were skewed.

The market realised the detail was very lopsided. It was all one state, it was all female and the unemployment rate ticked up. That spike was quickly undone’.

Once they did, pessimism took over and the dollar edged downwards.

But the topsy-turvy movements didn’t end there. The Aussie regained its losses in overnight and early Friday trade. Why?

The feeling is that even the mixed jobs data might be enough to prevent another rate cut. The RBA doesn’t want to cut rates, and will use the unemployment rate to justify that. They’ll point to a surging participation rate as a sign of confidence in the economy.

Where does that leave us for the rest of Friday?

Mr Frankulovich believes the dollar will trade between $0.731 and 0.736 against the greenback today.

Aussie dollar: Two things to look out for today

Throughout the day, there’ll be a couple of things for currency traders to keep an eye out for.

The RBA is expected to deliver a statement on its future monetary policy later today. We’re not likely to see them make any concrete statements. Even a hint may not be forthcoming. The RBA will likely wait to see if the US starts lifting rates in September before making any definite calls.

Overseas, the US non-farm payroll employment data will affect the greenback in trade today. If the news is positive, the AUD should trend lower for the day. Negative figures, on the other hand, could push the Aussie dollar up slightly. If it proves to be the latter, the Aussie may trade in a band between $0.735 to $0.737 for the day.

Mat Spasic,

Contributor, The Daily Reckoning

 

PS: The Daily Reckoning’s Greg Canavan believes Australia’s economy is heading for disaster.  As one of Australia’s leading investment analysts, Greg is convinced that Australia faces a recession in 2015.

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