Australia (common Wealth) _ The Australian Dollar recovered early losses on Thursday following a strong jobs data that showed a drop in the unemployment rate, which might revive price pressures and make the RBA’s July meeting more interesting.
In May, the unemployment rate was 3.6%, compared to the 3.7% predicted and before. 75.9k Australian jobs were added in the month, well exceeding the 17.5k projected and -4.3k prior.
The full-time increase of 61.7k and the slight increase in participation rate to 66.9% from 66.7% were noteworthy.
Earlier this month, the RBA raised interest rates by 25 basis points (bp) to 4.10%. Prior to today’s data, the overnight index swaps (OIS) market assigned a 20% chance of a cash rate hike by the RBA at its July monetary policy meeting. They now estimate a little more than a 40% chance of a 25 bp hike.
However, for the Australian Dollar, the strong domestic data was partially offset by weak Chinese statistics. To the end of May, year-to-date industrial production was 3.6%, lower than the 3.9% expected, albeit year-on-year growth was 3.5%.
Retail sales fell 12.7% year on year, falling short of expectations of 13.7% and 18.4%, respectively. Fixed-asset investment growth has been 4% year to year, less than the 4.4% predicted. The surveyed urban unemployment rate remained constant at 5.2%, as expected.
The People’s Bank of China (PBOC) offered markets a small support on Tuesday by lowering the 7-day reverse repo rate from 2% to 1.9%. Then, today, they reduced the 1-year medium-term loan facility rate to 2.65% from 2.75%.
The poor economic performance of the world’s second-largest economy has fueled anticipation that Beijing will implement additional stimulus measures.
The Federal Open Market Committee’s (FOMC) overnight decision to hold its target rate steady, followed by the ensuing statement and press conference, offered some pyrotechnics for the AUD/USD.
Looking ahead, the price of an RBA rate increase, Fed talk about future hikes, and the economic outlook for China, if there is a significant shift in policy, might all play a part in AUD direction.
