The AUD continued to underperform yesterday, with the jobs data bringing bad news for the economy and the currency itself. The poor performance of the Australian economy could be leading the AUD down the path of another future rate cut from the Reserve Bank of Australia (RBA).
Jobs Figures Turn up a Surprising Number, but it Was Not in favour of the AUD
Investors were left deflated on Thursday as the awaited jobs data for Australia was released. There were optimistic hopes for the data and the potential boost it could give to the troublesome Aussie Dollar. But with this, there were also fears that disappointing figures may bring about further decline for the currency. Much to the investor’s disappointment, the latter was exactly the case.
The jobless rate rose to 5.3% from 5.2% in October, with 19,000 jobs being shed last month. The market had looked for a 16,200 gain as a measure to keep the jobless rate steady at its previous level. This data shocked many and was certainly not welcomed with open arms by the Reserve Bank of Australia (RBA). To add salt into the wounds, poor retail sales and industrial production figures were released from China. The Chinese economy is important to Australia’s economy and currency outlook given the significant trading between the two.
RBA Weighs up its Options Before Making Any Further Cuts
The RBA has been under pressure lately with the underperformance of the AUD. It has already cut its interest rates three times in 2019 and appears to want to keep it that way. However, the pressure is building, and experts are hinting that a cut may occur in early 2020. The RBA has proposed that it will “wait and see” what the effects of previous cuts are before making any more, with rumours that this may suggest it could be around February 2020 before cuts are made again.
Outlook For AUD Looks Bleak as GBP Gains Against AUD
The pound gained against the Australian dollar early yesterday morning, which pushed the GBPAUD interbank rate to some of the highest levels seen in the past 3 years. The rate reached around 1.9018, and the GBP mainly has the AUD’s weakness to thank for this. The disappointing jobs figures have only weighed further on an already declining Aussie dollar.
Financial markets are now expecting another 0.5% interest rate cut by the RBA in February 2020. The likelihood of this is quite high following recent underperformance. Investors will be eager to observe the cards played by the RBA in the upcoming months.
Feel free to email me, Dayle Littlejohn if you would like to know more on the factors affecting the AUD/GBP pairing or have an upcoming currency transfer [email protected].