Tight Unemployment Creates Headache for RBA
AUD
The Aussie Dollar opens higher against most majors as Australia’s Unemployment Rate falls to an 8-month low of 3.9%, firmly pushing back against recent talk of a potential RBA interest rate cut in February. This was largely due to the economy adding 35.6k jobs in November, exceeding expectations of a 26k gain. The surprisingly hot jobs report has thrown a spanner in the works for the RBA, which up until yesterday, has seen weak Aussie GDP and falling inflation as potential signals for near-term cuts. A tight Unemployment Rate presents an inflationary risk. Asian equities finished the day mixed with the NIKKEI 1.2%, SHANHGAI COMP 0.8%, and the ASX -0.3%. Commodities were all down with Iron Ore -1.3%, Copper -0.6%, Gold -0.1% and Silver -0.3%. There is no data coming out of Australia today, while China has their New Yuan Loans which is expected to uptick to CNY990B.
USD
The AUDUSD pair opens flat this morning at 0.6368, hitting highs of 0.6430 yesterday after Australia's surprise tightening in the Unemployment Rate. Despite our strong labour data, the USD strengthened against the AUD overnight as their Producer Price Inflation came in hotter than expected at 0.4% month-on-month. Despite this inflation reading, markets are now almost fully pricing a 25-basis point cut at the Fed’s meeting next week, compared with about a 78% chance a week ago. US equities all finished the day in the red with the Dow Jones -0.5%, S&P -0.4%, and the NASDAQ -0.4%. The US also had their Initial Jobless Claims data overnight which came in higher than expected at 242k. No major US data for the remainder of the week.
EUR
The AUDEUR pair opens slightly up at 0.6083 with the European Central Bank delivering an expected 25bps interest rate cut to 3.15% overnight, being the lowest level since March 2023. The Euro weakened as the ECB has dropped the reference to "keeping interest rates sufficiently restrictive for as long as needed" from the Monetary Policy Statement, meaning it's keeping the door wide open for more rate cuts to come. In the Press Conference, ECB President Lagarde noted that they did discuss a 50bps cut as the economy continues to struggle. European equities were flat, the DAX 0.1% and the CAC 0%. Today, Germany has their Balance of Trade figure, while France and Spain both have their Inflation Rate figures. We'll also see Eurozone Industrial Production figures.
GBP
The AUDGBP opens higher this morning at 0.5018 with the AUD benefiting from our surprise hot jobs report yesterday. The FTSE closed the day marginally higher at 0.1%. Yesterday, there was no major data out of the UK, while later on today they have their GfK Consumer Confidence and GDP M/M which is expected to uptick slightly to 0.1% from last month’s reading of -0.1%.
NZD
The AUDNZD pairs opens up higher this morning at 1.1040 mainly off the back of AUD strength due to positive employment data. Low tier data out of NZ yesterday, while today they had their Business NZ PMI which measures their manufacturing performance. It came in at 45.5 (previously 45.8) which continues its prolonged contraction of 21 consecutive months of decline.