Sean Callow, senior currency strategist at Westpac, suggests that the last time AUD traded below 68 cents was the 17th of October, on which Australia reported a fall in the unemployment rate to 5.2%, raising some caution that markets could be over-reacting to monthly volatility.
Key Quotes
“Pricing for the RBA to cut rates in February 2020 jumped from about 50% to 75%. Given that the RBA last week forecast the unemployment rate to sit around 5.2% through end-2020, the recent gyrations in the official data from 5.2% to 5.3% are unlikely to move the dial greatly.”
“However, Westpac was already predicting a February rate cut, so we won’t complain about market pricing moving closer to our view. The RBA is closely focused on the labour market and It was not a great week on that front. Along with the rise in the unemployment rate, October employment dropped 19,000, the largest monthly fall since 2016.”
“The fall in jobs followed another soft reading on wages growth in Q3. Overall wages grew just 2.2% over the year to September, down from 2.3% in June. The RBA would like to see wages growth closer to 3 ½ per cent in order for inflation to return to the middle of their 2 to 3% target band.”
“Updates on Australian consumer sentiment and business confidence were also on the soft side of long term averages, to round out a fairly poor week of Australian economic data. But global factors have also chipped away at the Aussie.”
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