Rising Employment Reading Triggers AUD/USD Exchange Rate Advance
The Australian Dollar to US Dollar exchange rate has risen by 0.3% today, following news of more employed persons in Australian during December.
Recent jobs stats have revealed a 34.7k increase in the December employment change, although the unemployment rate has also risen from 5.4% to 5.5%.
This unusual change in statistics is explained by the fact that more people are now looking for work.
The participation rate, which represents these prospective employees, increased from 65.5% to 65.7% during the month.
There has been a lot of commentary on what these results could mean; taking a highly optimistic approach, Ivan Colhoun of National Australia Bank said;
‘[It’s] an encouraging report for the economy, government and Reserve Bank of Australia (RBA).
We’ll need to see some further declines in unemployment and underemployment, but if they are forthcoming, wages growth should begin to lift and the RBA will likely be able to remove some monetary accommodation during 2018.
NAB continues to look for a 0.5% increase in Australian cash rates in the second half of this year’.
Mixed Reaction to AU Jobs Data Exposes Underlying Jobs Market Issues
Not all economists were as optimistic as Mr Colhoun about the latest Australian employment stats, which explains why the AUD/USD rate hasn’t risen further.
Among those keeping their powder dry was Callam Pickering, Australian Economist at jobs site Indeed. Mr Pickering highlighted consistent jobs issues in Australia, stating;
‘Labour market slack remains elevated, which helps to explain the ongoing weakness in wage growth and the cautiousness of Australian households.
The RBA would naturally be pleased with today’s outcome; much of the improvement in the labour market during 2017 was a surprise for policymakers.
Nevertheless, with wage growth and inflation so low, tighter monetary policy will not come into the RBA’s near-term calculations’.
US Dollar to Australian Dollar Exchange Rate Declines on NAFTA Fears
The US Dollar has dropped against the Australian Dollar, Euro and Pound today, due to growing concerns about ongoing trade discussions.
Negotiators are trying to improve the North American Free Trade Agreement (NAFTA), but there is also the risk that the US could withdraw from the deal entirely.
This is considered the ‘nuclear option’, but recent analysis suggests that a withdrawal will bring more damage than benefits to the US economy.
Among withdrawal problems, there are estimates that US businesses will see reduced trade with Canada and that Canadian exports would become more competitive.
AUD/USD Exchange Rate Forecast: Will Australian Dollar Advance on Confidence Score?
The Australian Dollar could appreciate against the US Dollar on 30th January, when the next high-impact AU data comes out.
This will be the NAB business confidence reading for December, which is tipped to rise from 6 points to 10.
US Dollar traders will be keeping an eye on Friday’s University of Michigan consumer confidence stat, which is forecast to show a minor increase for the initial figure.
Higher consumer confidence after a year of President Trump could be interpreted as a good sign for the economy, and may inspire a USD/AUD rate rise.