The Australian dollar is in positive territory for a second straight day. In the European session, AUD/USD is trading at 0.7233, up 0.30% on the day. On the fundamentals front, Australian employment numbers were sharp. In the US, it’s a relatively quiet day, highlighted by the Philly Fed Manufacturing Index and unemployment claims.
Australia unemployment rate slides
Australia is in the midst of a job boom, and this was confirmed by excellent job data for December. The unemployment rate fell from 4.6% to 4.2%, its lowest rate since the GFC. Job creation was better than expected, as the economy created 64.8 thousand jobs, above the consensus of 4.3.3 thousand. This follows the monster gain of 366 thousand news jobs in November.
At the same time, job vacancies remain historically high, some 40% of businesses reporting difficulties in hiring enough staff. With unemployment falling and inflation rising, wages should increase at a faster pace, and that could have a significant impact on when the RBA raises rates. Wage growth in Q3 was running at 2.2% y/y, while the RBA has said that it would not consider raising rates before wage growth hits 3%, which is unlikely to occur prior to 2023. Still, if inflation continues to move higher, the pressure will increase on the RBA to raise rates, as has been the case with the Fed and the BoE.
On Wednesday, Australia’s Westpac Consumer Sentiment for January disappointed with a reading of -2.0%, marking a second straight decline. Consumers are wary that the spike in Omicron cases could trigger further lockdowns. The number of hospital cases has swelled and supply chains have been disrupted, with reports of shortages of food on supermarket shelves. With tens of thousands of cases being recorded daily, it’s no surprise that consumers remain wary and worried.
- There is resistance at 0.7304 and 0.7392
- AUD/USD has support at 0.7139 and 0.7062
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