AUD/USD and NZD/USD Fundamental Daily Forecast – Aussie Employment Misses Forecast; Jobless Rate Stays Low

The Australian Dollar is trading sharply lower early Thursday after the release of disappointing employment data. The move confirms the previous session’s technically bearish closing price reversal top that was fueled by hawkish comments from a Federal Reserve official.

The New Zealand Dollar is also down early in the session after New Zealand Prime Minister Jacinda Ardern said she will not seek reelection.

At 01:00 GMT, the AUD/USD is trading .6910, down 0.0031 or -0.45% and the NZD/USD is at .6425, down 0.0019 or -0.30%. On Wednesday, the Invesco DB US Dollar Index Bullish Fund ETF (FXA) settled at $27.56, up $0.01 or +0.04%.

Australia Jobs Fall 14,600 in December, Unemployment Steady

Australia employment unexpectedly dipped in December following an outsized gain the month before, while the jobless rate stayed near five-decade lows, Reuters reported.

Figures from the Australian Bureau of Statistics on Thursday showed net employment fell 14,600 in December from November, when they surged by a revised 58,200, and missed forecasts for an increase of 22,500.

The jobless rate held at 3.5%, just above the recent 48-year trough of 3.4%, while the participation rate dipped to 66.6% from a record high.

The report is bad news for the economy, but good news for Reserve Bank of Australia (RBA) policymakers. The figures suggest that the RBA’s rate hikes may be having an impact on the country’s labor market which is what RBA Governor Philip Lowe was hoping.

New Zealand Prime Minister Ardern Will Not Seek Re-election

New Zealand Prime Minister Jacinda Ardern announced Thursday she will stand aside for a new leader within weeks, saying she doesn’t believe she has the energy to seek re-election in the October polls.

Speaking at a news conference, Ardern said her term would end by February 7, when she expects a new Labour prime minister will be sworn in – though “depending on the process that could be earlier.”

Short-Term Outlook – Risky Assets Under Pressure

Besides the domestic developments, the Aussie and Kiwi are being pressured by a general sell-off in higher risk assets, led by Wednesday’s steep declines in the U.S. stock markets.

The pressure is being fueled by hawkish comments from St. Louis Fed President James Bullard who said Wednesday that U.S. Federal Reserve policymakers should get the policy rate of interest above 5% “as quickly as we can” before pausing rate increases needed to battle an ongoing outbreak of inflation.

Asked during a Wall Street Journal event if he was open to another half point rate increase at the Fed’s upcoming meeting, Bullard responded “why not go to where we’re supposed to go?…Why stall?”

Bullard said he felt the policy of “frontloading” rate increases with larger three-quarter-point and half-point increases had worked well, and that he saw no reason to stop until the policy rate was nearer the level seen as a likely stopping point.

As far as the Australia employment data is concerned, the RBA was expected to raise rates by 25 basis points in February. But the data puts policymakers in nearly the same position as the Fed. They have to determine whether it’s prudent to hike rates again and put further pressure on the labor market, or just sit back and observe what happens next.