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James Hyerczyk

The Australian and New Zealand Dollars are trading mixed on Thursday with the Aussie being driven lower by bearish jobs data, while in-line growth data holds the Kiwi in check. The price action in both currencies this week clearly shows a shift toward further interest rate cuts by their respective central banks after a two-week reprieve in their downtrends.

At 09:32 GMT, the AUD/USD is trading .6798, down 0.0032 or -0.46% and the NZD/USD is at .6318, up 0.0002 or +0.01%.

News Highlights

On Wednesday, the U.S. Federal Open Market Committee voted 7 to 3 to cut its Fed funds target to a range of 1.75% to 2.00% “in light of the implications of global developments for the economic outlook.” This move was widely expected. However, policymakers offered mixed signals about future easing.

The Australian Dollar was a big loser on Thursday, posting its worst performance in a month as expectations for more central bank rate cuts jumped after joblessness hit a one-year high.

The Employment Change report showed the economy added 34.7K jobs in August, however, the previous month was revised lower to 36.4K from 41.1K. Traders were looking for an increase of 15.2K.

The Unemployment Rate rose to 5.3%, up from 5.2% where it had held steady for several months.

The New Zealand Dollar traded steady to lower on Thursday as quarterly GDP growth came in as expected. New Zealand’s GDP rose by 0.5% over the June quarter, for a 2.1 percent gain over the same quarter of last year, but in line with a general slowdown in economic activity.

The gain compares with a 0.6 percent rise in the March quarter, which made for a quarter-on-quarter rise of 2.5 percent.


Daily Forecast

The rise in Australian Unemployment is the big surprise because it follows two consecutive aggressive rate cuts by the Reserve Bank of Australia in June and July. After taking a “wait and see” tone in August and September, RBA policymaker makers have “waited and seen” the results, which could mean another rate cut as soon as its policy meeting on October 1.

After the release of the bearish unemployment report, expectations for the RBA to cut the official interest rate to 0.75 percent in less than two weeks surged to 70 percent, compared with 42 percent the day before the report.

Reserve Bank of New Zealand policymakers took a seemingly easier path than their Australian counterparts, slashing rates 50 basis points in August which seemed like an aggressive move at the time. Although the GDP report covers the quarter before the rate cut, it indicates a sluggish economy, which likely means the RBNZ will also cut rates at its next meeting on November 12, especially since it will be the last meeting of the year and they will want to begin 2020 knowing the economy had some minimal support.

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