AUD/USD hovers near five year low ahead of labour force data
Australia’s labour market is expected to have cooled in December, according to economist forecasts. The economy is projected to have added 15,000 jobs in the month, lifting the unemployment rate to 4.0%. The lukewarm estimate follows a drop in the unemployment rate to 3.9% in November, owing to a combination of strong full time employment growth and a drop in the participation rate.
(Source: Trading Economics)
Strong hiring conditions defy an otherwise weak economic backdrop in Australia. Labour demand and job creation consistently surprise to the upside in 2024, despite near recessionary growth conditions. The trend has been one factor in keeping the RBA neutral in its policy stance, with the jobless rate below the nominal level identified by the central bank as representing full employment.
The markets have recently shifted towards pricing-in looser policy from the RBA. Following weak GDP data in December, a dovish shift in guidance from the central bank at its final meeting of 2024, and a lower than expected monthly CPI indicator for November, the markets imply a roughly 70% chance of an RBA cut in February. The December labour force report will colour these expectations and whether labour market resilience continues to be a counterweight to any dovish bias from the RBA.
(Source: Bloomberg)
Looming rate cuts is one factor pushing the AUD/USD towards a five year low, along with bearishness towards China’s economy, and the surge in the US Dollar driven by strong growth, an unwind of Fed rate cut expectations and the expected impacts of Trump’s tax cut and tariff policies. The AUD/USD remains in a primary downtrend after breaking technical support around 0.6170; however, a reversal from oversold territory on the weekly RSI suggests the pair could be poised for a looming retracement.
(Source: Trading View)
(Past performance is not a reliable indicator of future results)