AUD/USD and NZD/USD Fundamental Daily Forecast – Despite Soft Jobs Data, RBA Poised to Raise Rates

The Australian and New Zealand Dollars are edging higher on Thursday after rebounding from an early session setback and yesterday’s steep sell-off.

Wednesday’s weakness was fueled by another round of upbeat U.S. economic data, while in Australia overnight, domestic jobs data surprised to the downside.

At 11:39 GMT, the AUD/USD is trading .6910, up 0.0007 or +0.10% and the NZD/USD is at .6292, up 0.0011 or +0.17%. On Wednesday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $68.28, down $0.92 or -1.33%.

Australia Employment Falls, Jobless Rate Hits 8-Month High

Australia employment surprised in January by falling for a second straight month while the jobless rate jumped to its highest since last May, a soft result that could lessen pressure for further aggressive interest rate hikes.

Figures from the Australian Bureau of Statistics on Thursday showed net employment fell 11,500 in January from December, when they dropped a revised 19,900. Market analysts were looking for a rise of 20,000 in January.

The jobless rate climbed to 3.7%, when analysts had looked for it to hold at 3.5%, and hours worked fell by a sharp 2.1% as more workers than usual took annual leave in January, Reuters reported.

Aussie Labor Market Miss Challenges RBA’s Latest Forecast

Thursday’s Australian labor market data may have fueled higher than usual technical noise in the marketplace, but the bottom line is the miss by both the number of jobs added and the unemployment rate is likely to create a challenge to the Reserve Bank of Australia’s (RBA) latest forecasts which had unemployment at 3.6% by June and 3.8% by year end.

Tight Labor Market Means More Rate Hikes

The RBA will be assessing the jobs data to see if there are signs the labor market is cooling and taking some pressure off wages growth, which can influence inflation. However, the January data didn’t provide any conclusive evidence that it is. The data suggests the labor market may be tracking sideways, but it’s still in a tight position.

Earlier in the week on Wednesday, Reserve Bank Governor Philip Lowe signaled more interest rates are on the way in hawkish comments at a Senate estimates hearing.

Dr. Lowe doubled down on the need to raise the cash rate – which is at 3.35 percent, its highest in more than a decade – to drive down inflation, saying he was “unsure” how high interest rates would need to go.