- Asian equity markets bounce back despite declines seen on Wall Street
- Australian employment grew less than expected but the overall outlook remained fairly upbeat
- Jobless rate slid, however labor force shrank at the same time
- Australian dollar gains modestly in the aftermath of the data, a key resistance still in place though
- FED’s Rosengren backs a rate hike in the following month
Before we move to analyze the jobs market from the Australian economy it’s worth mentioning somewhat about the Asian session which has brought a breakthrough as the major indices are trading higher just a while before the close. The Japanese NIKKEI (JAP225 on xStation5) is by far the best performer climbing as much as 1.5% while Hang Seng is going up 1.2% at the time of writing. This improvement has come in despite another grim day across the pond which ended with widespread falls as the main indices lost approximately 0.5%.
Despite a slowdown seen in part-time employment both trends held onto their upward momentum in October. Source: Macrobond, XTB Research
Looking at the FX market one can notice that the Australian dollar is marginally higher in early trading following the fairly upbeat labor market report which came overnight. Although an employment change missed the forecast (18.8k) vastly producing just 3.7k the breakdown of growth seems to be supportive of the AUD. First and foremost, full-time employment increased 24.3k while part-time slumped 20.7k. On the other hand we also got upward revisions to September as overall employment was revised up from 19.8k to 26.6k, full-time and part-time were lifted as well. On top of that, the jobless rate ticked down from 5.5% to 5.4%, however it was fully offset by a decrease in the labor force participation rate which slid from 65.2% to 65.1%. To sum up, one can arrive at a conclusion that the Australian labor market remains one of the brightest spot in the economy, however until the tight market does not spur employers to lift wages, the RBA is unlikely to change its rhetoric therefore the upside of the AUS could be contained.
Besides, the NZ dollar is the weakest currency in early trading losing 0.25% against the US dollar which could be explained by a decline seen in the ANZ consumer confidence gauge sliding from 126.3 to 123.7. In turn the US dollar index is treading water at the time of writing even as the US10Y yield is increasing a touch more than 2bps. Finally, it’s worth mentioning remarks of FED’s Rosengen who openly backed a rate hike in December saying that low inflation could be successfully explained by temporary factors.
Despite a rise seen in the AUD overnight, a technical outlook hasn’t changed too much. The AUDUSD is still hovering below its downtrend which needs to be broken in order to allow the pair to creep up. Nevertheless until the pair remains below this trend line, a continuation of the ongoing decline seems to be a base scenario. Source: xStation5