Employment Data Boosts Australian Dollar, Will the Bullish Run Continue?

The Australian dollar has finally broken through the US77c mark on Thursday on the back of strong job figures which included a drop in the unemployment rate.

The Australian Dollar was rejected at 0.77 on Friday and close the week at 0.7662. However, a second attempt to break above this level will not be a surprise.

Employment data out from Australia showed the unemployment rate fell to 5.7 percent, down from 5.8 percent and slightly better than analysts’ expectations.

The number of new jobs created was 13,500 versus a forecast of 10,000 with part time employment rising 58,300 while the number of full time jobs slumped by 44,800.

The figures overall are a good result for the Australian economy but some say the rise in only part time employment is a worrying sign, and it may cause some problems later on down the track,

“January’s labour market figures highlight that jobs growth has sustained its recent momentum, but the now-familiar problem of the new jobs being mostly part-time ones rather than full-time ones reared its ugly head again,” Capital Economics chief Australian economist Paul Dales said.

“The number of people working full-time is no higher now than it was in August 2015. This is weighing on incomes as lots of people are working fewer hours and the excess supply of labour is keeping wage growth low,” he added.

Mr Dales also said that even if the unemployment rate continues to fall, it won’t benefit the economy much as wages will remain stagnant and inflation will continue to sit below the Reserve Bank of Australia’s target rate which may keep a rate cut on the table,

“Looking ahead, subdued economic growth will probably keep the unemployment rate close to 6 per cent this year. But even if it fell, the high rate of part-time employment and associated rise in underemployment will keep a lid on wage growth and the underlying rate of CPI inflation.” He said.

Technically, the Aussie lays in t critical level as a break above 0.78 can signal for further strength of the currency. The high inflation figures along with positive employment data indicates that the Reserve Bank of Australia might increase interest rates soon.

The review was prepared by FIBO Group analyst Andrew Masters.