Anther reason to exit the Australian dollar
Published on 20.04.2018 16:46

Most in the market have been scratching their heads and wondering just how has the Australian dollar has managed to gather support with all the negative factors connected with interest rates and commodities among others surrounding the currency.

Iron ore, Australia’s biggest commodity has slumped since. The start of the year and in previous times on a percentage basis the Aussie dollar has travelled in correlation with iron ore but currently the currency has not fallen as much as it should have.

It means the die-hard supporters of the Australian dollar are hanging in there and propping up the price but that all may be about to end after the release of key employment data that shows the jobs market in Australia to be in grave condition.

The unemployment rate held steady at 5.5 percent but the economy only added 4,900 jobs last month which were all part time and the most disappointing factor was the loss of 19,900 positions which were all full time.

The jobs market has been one of the darling sectors of the Australian economy in recent years but after yesterday’s report it seems as if some cracks are appearing,

"In part this was inevitable, the economy can't sustain growth of more than 400,000 per annum”. said Sarah Hunter, BIS Oxford Economics’ head of macroeconomics for Australia.

 Jobs growth has remained somewhat soggy after last year’s spectacular performance and highlights that the labor market has run ahead of output growth in recent months.” she added.

Earlier in the week the RBA noted in their minute’s speech that they expected wage growth to pick up this year but that is hard to see happening if the amount of jobs being created is on the decline which will eventually lead to a rise in the unemployment rate.

The key now for the Australian dollar will be next week’s inflation figures due for release on Tuesday and if they hit the market below expectations it may raise speculation that the next move regarding interest rates from the Reserve Bank may be down and not up.

The material published in on this page is produced by the FIBO group companies, and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC; furthermore it has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

Andrew Masters

Analyst

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