Thursday saw the release of the employment data in Australia for the month of November. The figures were a shock fall in unemployment and as a result AUD rose. With the positive jobs data, some have suggested that this should take a load off the back of the RBA who have been edging towards a rate cut in early 2020. However, Westpac has now tipped investors to sell AUD as it eyes up a potential slowdown in 2020.
Jobs Data Performs, Brings up AUD with It
Yesterday was a positive day for the Australian Dollar, with a blowout jobs report being set on the table. The report showed that Australia’s economy had created 39.9k new jobs in November. This was a shock as the market had been anticipating a lesser increase of around 14.5k. This number was enough to drive the unemployment rate back down to 5.2% from the previous month of October’s 5.3%. Economists have welcomed this news with open arms as it may help ease concerns over a material slowdown to the labour market. But they also suggested that the RBA is aiming to see this figure drop to around 4.5% to provide more confidence that inflation will meet their target.
Performing Labour Market Has Been on the RBA’s Radar for the Future of Aussie Inflation
Economists have also taken note of Thursday’s data as the RBA previously flagged the labour market as one of the more important drivers in its stance on interest rates due to the effect that rising and falling employment figures can have on both wage growth and inflation statistics. The RBA has made three cash rate cuts in 2019 to attempt to lift the Aussie inflation to around the 2-3% target band. This has left the rate at 0.75%. Markets are betting that the RBA will likely cut rates again before April 2020 but with the RBA claiming that it may ‘sit on its hands’ before doing anything more and let the impact of the three previous cuts run their course first.
Westpac Tips Investors to Sell AUD
Whilst the AUD appears to be benefiting from the jobs data, Westpac have urged investors that the AUD is a sell. Representatives from Westpac have stated that the RBA is heading into 2020 with an over-optimistic view on Australia’s prospects. They highlighted the Q3 GDP report and partial data as key weaknesses to the AUD’s performance in 2019 and have stated that they expect the RBA to cut its rate down to 0.5% in early 2020 with a potential further cut down to 0.25% towards the end of the year. This has prompted Westpac to urge their clients to sell AUD/USD should the rate make its way back up to the 0.6950 level. This has left investors in the AUD a little uneasy as the RBA evidenced that this may be the case in their December policy meeting.
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