Coming up, we’ve got some key employment data out of Australia. And this release has a habit of moving the AUD and NZD.
It’s the first time we will be getting a full set of jobs data after the RBA’s first rate cut, so everyone is extra interested to see what, if any, effect there was from monetary policy.
Also, in the minutes of the last meeting, the RBA made it clear that they are paying close attention to the labor market. This is while they consider if even another rate cut would be indicated. Of course, inflation remains the preeminent gauge for the central bank, but we’re going to have to be looking at employment a lot more closely going forward.
How Things Are Shaping Up
This week is pretty quiet on the economic front. In fact, this is the last major data until the end of the month, leaving the currency pretty much in the hands of technicals.
This doesn’t mean that we will see a pause in volatility, though. There is still a wealth of economic data from outside the country continent that could affect the exchange rate.
The market usually focuses on the employment change figure, similar to how it does with the US NFP. And the unemployment rate usually takes second fiddle. The participation rate is really only relevant to parse an unexpected change in the jobless rate.
The consensus among analysts is that employment data will come in on the soft side. Projections are for 27.8K jobs to have been added in June. This would be quite a drop from the 42.3K registered the prior month. Of course, it’s also the middle of winter in Australia, which is likely to impact the figure as well.
For reference, there is something of a “normal” range for job adds, which is between 10-40K. Beyond those ranges, we could expect a stronger reaction from the market.
Aside from the raw number of jobs created, the perception of labor tightness could also move the markets. If employers are finding it difficult to get employees, we could see rising wages and further inflation.
The expectations are for the unemployment rate to stay the same at 5.2%. The rate has been slowly creeping up after bottoming out at 4.9% in February. A slight tick up wouldn’t be all that much of a surprise to the market considering the weaker projections for job creation.
However, softer labor figures would be quite disappointing for the RBA. With the telegraphing of two hikes well ahead of the meeting, it would be expected that the measures had at least some impact.
Last week, we had consumer and business confidence that disappointed quite a few analysts. This has led to the projections of the softer job figures this time around. Generally, there is a bump up in employment during the election period, which also contributes to the softer jobs result.
This means that there is at least a portion of the market pricing in a below average unemployment figure, and that can give us some potential for a strong upside if the data were to beat expectations.