- AUD slips as Westpac predicts an RBA rate cut in October.
- Aussie data show labor market weakness.
AUD/USD is losing altitude with Westpac, one of the big four Australia banks, bringing forward the timing of the next rate cut by the Reserve Bank of Australia (RBA).
The investment bank now expects the RBA to deliver a 25 basis point rate cut in October compared to the previous forecast of a rate cut in November.
The latest prediction is based on the assessment that the unemployment forecast will challenge the RBA.
“By October, we expect that the path of the unemployment rate will be sufficiently contrary to the RBA’s plans that they will have appropriate justification to ease policy a little earlier than we had previously expected,” Westpac Chief Economist Bill Evans wrote to clients in a note, according to Reuters.
Note that the jobless rate has already ticked higher to 5.2% from 4.9% in February in recent months.
The data released earlier today also pointed to labor market weakness. For instance, skilled vacancies fell 6.7% year-on-year in June. Further, the Commonwealth Bank of Australia Composite PMI for July showed employment decreased for the first time since April and to the greatest extent since May 2016.
Hence, the AUD has come under pressure despite the risk-on in the US and Asian equities and could slide further to 0.6957 (50% Fib R of 0.6832/0.7082).
As of writing, AUD/USD is seen at 0.6980.