Aussie Employment Weakens
The Australian Dollar has come under selling pressure overnight and across the European open on Thursday. The sales come on the back of the latest set of employment data for the country, released overnight, which proved to be worse than expected. Given the fresh lockdowns which were in place across parts of Australia last month, economists were anticipating some weakening in the labour market.
Unemployment Rate Increased In October
However, the impact of the lockdowns proved to be worse than expected with the unemployment rate surging back up to 5.2% from 4.6% prior. This was well above the 4.8% reading expected and raises fears about the broader economic impact of the lockdowns. Additionally, the employment change figure, which was expected to print 50k, printed – 46.3k in stark contrast, once again raising fears over the true economic cost of the lockdowns.
RBA Impact
This data will no doubt complicate the picture further for the RBA. Ahead of the most recent lockdowns, the economic recovery in Australia had been gathering momentum nicely, leading to growing RBA tightening expectations. However, these expectations were dialled back once the lockdowns were announced. While the RBA has laid out it intentions to commence tightening as soon as the economy is ready, the fear now is that the bank’s own projections will be rendered less reliable as a result of these releases.
Wage Growth Fears
Wage growth has been one of the key sticking points for the RBA in terms of obstacles for tightening. With the labour market having taken a further knock last month, wage growth will no doubt be weakened further. The key now will be waiting to see how other key indicators have been affected by the lockdowns and to what extent the economy can rebound this month. If the bounce back is quick over November, this should offset any material AUD weakness. However, if the damage from the recent lockdowns proves to be longer lasting, this will likely lead AUD lower into the end of the year as traders focus their monetary policy tightening expectations elsewhere.
Technical Views
AUDUSD
The sell off in AUDUSD has seen price breaking down through the .7339 level. Price is now quickly approaching a key technical level around the .7243 mark where we have confluence between structural support, the rising trend line from YTD lows and the retest of the broken bear channel. A break below here will be a strong bearish development for AUDUSD.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.