Will this week’s Australian jobs numbers support another RBA rate hike?
Here are the key points you need to know if you plan to trade this week’s Australian labor market report:
Focus on the event:
Australian Employment Data for April: Employment Change, Unemployment Rate
When will it be released:
May 18, 2023 (Thursday) 1:30 AM GMT
Use our forex market hours tool to convert GMT to your local time zone.
Expectations:
- 25100 Added net posts For the month of April, it was slower than the 53,000 jobs added in March
- Unemployment rate To maintain its reading of 3.5% (low in 50 years) for the third month in a row
- The labor force participation rate to remain at 66.7%
Related data since the last data event/release:
- Judo Bank Australia Services PMI The business activity index rose from 48.6 to 53.7 – its fastest pace in a year – in April
- ANZ job postings It fell 0.3% month over month in April, after a previous drop of 2.4%.
Previous issues and the impact of the risk environment on the Australian dollar
April 13, 2023
Event Results/Price Action:
Australia added a net of 53,000 jobs in March, more than double the estimated increase of 20,800 and slightly less than February’s gain of 63,600 jobs. The unemployment rate held steady at a (near) 50-year low of 3.5%.
The Australian dollar, which had been ranging near daily opening prices, revisited the US session’s highs upon the news. The rate fell during the European session, but ended the day higher against all of the major currencies except the New Zealand dollar.
Risk Environment and Intermarket Behaviors:
The slower-than-expected US CPI report and FOMC meeting minutes showed that members considered that rate hikes boosted risk appetite ahead of Australia’s print jobs data.
The risk-friendly trading environment helped the Australian dollar outperform its peers when the report was released. The move only lasted into the US session, however, as the US PPI report dictated risk sentiment during the US session.
March 16, 2022:
Australian Dollar Pairs Overlay: 1-Hour Forex Chart
Event Results/Price Action:
Australia added a net 64,600 jobs in February, much better than the expected addition of 49,700 jobs and the net job loss in January of 10,900.
All of the added jobs helped lower the unemployment rate from 3.7% to 3.5% even as the labor force participation rate rose from 66.5% to 66.6%.
The Australian dollar, which was ranging near the US session’s closing prices, rose against its major peers when the report was released. In fact, the highs reached in the first hour after the release became major inflection points during the London and US trading session.
Risk Environment and Intermarket Behaviors:
Markets were in risk averse mode a day before the report was released, with Credit Suisse traders acknowledging “significant deficiencies” in their financial reporting and the National Bank of Saudi Arabia – Credit Suisse’s largest investor – not providing financial assistance to the banking giant.
Fortunately, the Swiss National Bank (SNB) intervened the next day and eased banking concerns. Better-than-expected Australian jobs data helped the “risky” Australian dollar maintain its mid-week rally, and eventually ended the week in the green against all major currencies except the New Zealand dollar and the Japanese yen.
Price action odds:
Possibilities of feeling risky:
Risky assets such as the Australian dollar start the week on shaky ground although they benefit from anti-dollar sentiment ahead of debt ceiling talks on Tuesday.
We could see a clearer picture of risk sentiment trends during the week after China releases its producer and consumer reports (we are currently expecting a recovery in retail sales and industrial production data). Rhetoric from FOMC members – which may be more hawkish than dovish – could support the US dollar and influence the general risk sentiment.
At the moment, the outlook for broad risk-taking looks choppy; It’s probably best to stay agile, and to see and interact with higher-level events.
Australian dollar scenarios:
Possible base scenario:
Based on the recent two releases and the decisive rate hike by the RBA, it appears that the Australian labor market may show more strength in April.
But between worries about the US debt ceiling, global growth concerns, and hawkish FOMC speculation, the Australian dollar’s immediate reaction may be limited to a positive read on the Asian trading session.
The bulk of the Australian dollar’s reaction tends to occur in the first hour after the release. This does not mean that we will see it again, but it is probably a good idea to include this behavioral tendency in your strategy and risk management plan beforehand.
If you miss the initial move, you can also make day trades with the highs/lows after the release as inflection points, as long as a new catalyst does not come to change your biases during the day.
In the event of another better than expected release and the broad risk appetite is positive, consider buying the Australian dollar against safe havens such as the US dollar, Japanese yen and Swiss franc.
Possible alternative scenario:
If Australia’s key jobs numbers miss market estimates, expectations for the RBA’s June interest rate hike could decline and the Australian dollar could lose ground.
Consider shorting the Australian dollar against the US dollar and also against currencies with hawkish central banks such as the New Zealand dollar and the British pound; Convincing to sell the Aussie may increase if the overall risk sentiment is negative during the session.
