In a reversal of December’s trend, Australian unemployment edged higher to 5.3% in January, whilst employment showed a small rise.
The release helped the GBP v AUD exchange rate to tick higher on the day to a high just shy of 1.9500. The market has since pulled back slightly to trade 0.35% higher around the 1.9450 level.
Employment Trend Goes Against RBA Desires
The Reserve Bank of Australia has been vocal in recent weeks that it would only consider additional stimulus measures if the economy worsened and cited employment as a key driver for their decision.
The latest tick higher in unemployment is not ideal for the RBA but the increase of 13.5k jobs versus the 10k expected, helps to balance the situation and markets will watch the numbers in the coming months to get a clearer picture. The next data release for the Aussie dollar comes late this evening with the PMI figures for manufacturing and services. A reading above 50 indicates expansion but the Australian economy has seen its manufacturing and services contract for two-to-three months. Markets will be looking for this trend to reverse in the January figures.
The U.K. release its own PMI numbers tomorrow and the tale of these two releases will be the driver for the AUD to GBP over the next 24 hours. The situation was better for the U.K. as both its PMI releases showed markets at the 50 or above and a continuation of these trends would boost the pound. The end of the Brexit confusion and political stalemate has boosted U.K. industry in recent weeks and this may translate into better PMI numbers.
Australian Outlook Improving with the Asian Recovery
Asian markets were higher once again with Chinese stocks leading the charge with a 1.84% rise. The growing optimism that the worst of the Coronavirus pandemic is over, has helped Australian stocks to record highs and will provide support for the Australian currency.
China reported 394 new cases yesterday, but this continues to fall as the country’s measures to tackle the outbreak are showing signs of success. The Hubei province, which was the centre of the outbreak is still on lockdown with firms being asked not to resume work before March 11.
Australia’s ASX 200 stock index was 0.25% higher at 7,162 as traders continue to brush off any fears over the economic impact of the virus.
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