Aussie Jobs Market Declines
AUD
The Aussie dollar opens down against majors despite having slightly retraced yesterday’s falls amid renewed global recessionary fears. While Asian equities were mixed, the ASX closed Thursday’s session up +0.6% to a 9-month high in light of the weaker-than-expected jobs report. The number of employed people in Australia fell -14.6k in December, falling short of expectations of a +26.5k increase, while the Unemployment rate increased slightly from a 48-year low of 3.4% to 3.5%. Despite signs that Australia’s red-hot jobs market may be cooling, economists believe it shouldn’t stand in the way of another increase in the official interest rate on Feb 7. Treasurer Jim Chalmers said the disappointing results was largely a combination of a slowing global economy and higher interest rates beginning to act as a brake on growth. Notably, there were headlines that Australian and Chinese officials had met on the sidelines of a meeting in Davos with an agreement reached that trade ministers from both countries would soon hold a video meeting. No market-reaction to the data. Nothing in the way of Aussie data today, while the Asian session highlight will be the Japanese national CPI print. Following the recent inflation prints for Tokyo, the headline figure is expected at 4.1%, up from 3.8%. Earlier this week, the Bank of Japan maintained ultra-low interest rates, defying market expectations it would phase out its massive stimulus program in the wake of rising inflationary pressure. BoJ Governor Kuroda indicated the central bank expects inflation to rein in from the latter half of 2023.
USD
AUDUSD opens down at 0.6911 while another soft night on Wall St saw the NASDAQ fall -0.6%, the S&P 500 -0.4% and the Dow Jones -0.3%. US December Housing Starts exceeded expectations of a 4.8% decline, arriving at 1.4 million, while the Philly Fed Business Outlook survey for January printed at -8.9, up from -13.7, despite overall manufacturing activity in the region continuing to decline. Notably, the FED’s Brainard hit the wires over the NY afternoon indicating rates would need to remain ‘sufficiently restrictive’ for some time in order to lower inflation to the 2% target. She later added that the FED had tightened a great deal and that they were beginning to see the effects on inflation, although policy must remain sufficiently restrictive for the time being. No US data today, while later this evening we will see the Canadian Retail Sales print with sales expected to decline -0.6%. As was the case in the US monthly figures, Canadian numbers should benefit from relief in gasoline prices & subdued core goods.
EUR
AUDEUR opens down at 0.6380 with the DAX & CAC losing ground amid firmly hawkish commentary from the European Central Bank. ECB’s Knot sees no signs of underlying inflationary pressures abating, adding that the ECB won’t stop after a single 50 bp hike and that markets should take their words quite seriously. Dovish expectations should be further challenged by the release of the DEC 2022 ECB meeting minutes, containing guidance of ‘multiple’ 50bp increases. We then heard from Lagarde who acknowledged inflation is still way too high, although there remains the possibility of only a slight contraction in the Eurozone. Tonight, Lagarde is expected to speak in a panel discussion at the World Economic Forum, titled “Global Economic Outlook: Is this the End of an Era?”
GBP
AUDGBP opens down at 0.5577 with relatively positive commentary from the Bank of England’s Governor Bailey. He indicated UK inflation was on track to fall sharply with lower energy prices set to drag inflation down, although the resilient labour market provided upside risk. He also predicted a ‘long but shallow’ recession in the UK. Today, the leader of the opposition Labour Party, Keir Starmer, is reported to deliver a rather conciliatory speech in Davos (World Economic Forum) about the future of EU-UK relationships. We’ll also see UK Retail Sales data for December, expected to increase +0.5%. A weak release will put pressure on the pound, which has looked sharp this week with 1.07% gains. Consumer Confidence is also set to remain in deep-freeze at -41 (above zero indicates optimism!), which is hardly surprising given the cost-of-living crisis that continues to squeeze consumers.
NZD
AUDNZD opens up at 1.0800 after hitting 3-week lows yesterday. New Zealand’s manufacturing sector saw the same level of contraction in December that it experienced the previous month, according to the latest Business NZ Manufacturing Index. The seasonally-adjusted PMI for December was 47.2 (a PMI reading above 50.0 indicates expansion) and reflects contraction for 3 consecutive months as the nation grapples with inflationary pressures. On a more positive note, the Kiwi tourism sector has welcomed a 43.1% increase in January’s Visitor Arrivals, with the biggest changes being arrivals from Australia (up 105,300).