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AUD/USD and NZD/USD Fundamental Daily Forecast – Traders Eyeing Australian Jobs Data

The Australian Dollar could rally on Thursday if the monthly employment data beats the estimates as it would further encourage investors to unwind RBA interest rate cut expectations. However, gains could be limited because of increasing concerns over the economic damage from the coronavirus outbreak.
James Hyerczyk

The Australian Dollar finished lower on Wednesday and the New Zealand Dollar ended up flat as investors continued to assess the potential impact of the coronavirus on their respective economies. Once again traders of both currencies refrained from participating in the “risk on” trade. Furthermore, both the Aussie and the Kiwi showed a limited reaction to the somewhat dovish minutes from the U.S. Federal Reserve.

On Wednesday, the AUD/USD settled at .6678, down 0.0010 or -0.15% and the NZD/USD closed at .6386, down .0001 or -0.1%.

Australian Dollar

Traders are awaiting the release of the latest Employment Change and Unemployment Rate reports. The Employment Change report is expected to show the economy added 10K new jobs in January. The Unemployment Rate is expected to come in at 5.2%, up slightly from the previously reported 5.1%.

About a month ago, the government reported that Australian employment outpaced forecasts for a second month in December, pushing the jobless rate to a nine-month low. The news prompted analysts to give up on a February rate cut by the Reserve Bank of Australia (RBA).

Recently RBA Governor Philip Lowe said while the unemployment rate at 5.1% is reasonable, it is desirable to have it much lower.

“If you told me two or three years ago we would have employment growth averaging close to 2.5%. I would have thought the unemployment rate would be close to four now,” he said.

“The big surprise has been rising labor force participation. There’s been no shortage of jobs growth in Australia. In fact, it has been very strong. But it is being met with a lot of extra labor supply.”

On February 7, the RBA updated its forecast for the economy. At that time, the RBA forecast that the unemployment rate would decline sooner rather than later, yet would still only reach 4.8% by mid-2022, above the estimated NAIRU of 4.5%.

ANZ Research said, “We expect the unemployment rate to drift higher, as employment growth slows before the labor market strengthens.”

The Australian Dollar could rally on Thursday if the monthly employment data beats the estimates as it would further encourage investors to unwind RBA interest rate cut expectations. However, gains could be limited because of increasing concerns over the economic damage from the coronavirus outbreak.

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