Looking for a news event to trade this week?
Here’s what you should know about Australia’s upcoming jobs release, how AUD might react, and what market analysts are expecting.
Event in Focus:
Australia’s April Employment Data: Employment Change, Unemployment Rate
When Will it Be Released:
September 14, 2023 (Thursday) 1:30 am GMT
Use our Forex Market Hours tool to convert GMT to your local time zone.
Expectations:
40K net jobs added for the month of August, a rebound over the 14,600 jobs lost in July
Unemployment rate to tick lower from 3.7% to 3.6%
Forecasts as of Sept. 12, 5:00 pm GMT
Relevant Data Since Last Event/Data Release:
ANZ job advertisements rose by 1.9% m/m in August, following an upgraded 0.7% gain in July (initially reported 0.4% uptick)
NAB business confidence index ticked higher from 1 to 2 in August
Westpac consumer sentiment index fell 1.5% in August, following earlier 0.4% dip, even as “Consumers were slightly more positive on labour market prospects in August, although still much less confident than they were at the start of the year.”
S&P Global flash composite PMI showed that “the labour market remained tight as firms in both sectors raised their workforce capacity with greater confidence of output rising in the 12 months ahead.”
Previous Releases and Risk Environment Influence on the Australian Dollar
August 17, 2023
Event Results / Price Action:
The Australian economy lost 14.6K jobs in July, contrary to the expected 14.6K increase in hiring. This brought the jobless rate up from 3.5% to 3.6% during the month, surpassing the consensus at 3.6%.
Not surprisingly, AUD continued its ongoing selloff for the week when the dismal jobs numbers were printed. Earlier in the week, the RBA’s meeting minutes showed that members already believe that they can achieve their inflation target “with the cash rate staying at its present level.”
Risk Environment and Intermarket behaviors:
Risk sentiment also wasn’t doing the Aussie any favors throughout the week, beginning with weekend news that a large property company in China might be due to default on its debt obligations.
Although the PBOC surprised the markets with an aggressive stimulus announcement, the positive vibes were mostly overshadowed by significantly downbeat retail trade and industrial production data from the country.
Then there was the FOMC meeting minutes which fueled expectations for stronger inflation and therefore more interest rate hikes, keeping investors on edge about recession risks.
July 20, 2023
Event Results / Price Action:
Australia’s June jobs figure turned out stronger than expected as the economy added 32.6K positions, more than twice the projected 15K gain. This was enough to keep the unemployment rate steady at 3.5% instead of rising the 3.6% consensus.
Aussie pairs were off to a shaky start but managed to get back on their feet when the RBA minutes turned out hawkish. The commodity currency was able to hold on to its gains against most of its rivals when the jobs report was printed, but it still wound up returning some winnings to lower-yielding counterparts.
Risk Environment and Intermarket behaviors:
Geopolitical tensions in Ukraine and concerns about higher global interest rates dominated the headlines during the first half of the trading week. Risk aversion also remained in play due to subpar growth data from China.
However, the tide turned in favor of risk assets when the PBoC set a much weaker USD/CNY fixing AND adjusted its financing rules so that companies could borrow more through cross-border financing.
From there, intermarket price action seemed to be all over the place, as equities, bonds and commodities struggled to establish a clear direction.
Price action probabilities:
Risk sentiment probabilities:
This trading week is off to a bit of a slow an mixed start as traders are likely waiting for the top-tier economic releases that aren’t due until the latter half.
Barring any major updates from China in terms of its struggling property companies and stimulus efforts, traders might hold out on high conviction risk sentiment biases until the U.S. CPI figures are printed on Wednesday.
After all, this could still impact FOMC tightening bets for September and the rest of the year, likely affecting overall market sentiment.
In particular, a strong upside U.S. inflation surprise update may revive global growth jitters again, putting higher-yielding currencies like AUD on shaky footing midweek.
Australia Dollar scenarios:
Potential Base Scenario:
Based on the latest jobs releases, the Australian dollar tends to have a pronounced reaction to the headline figures in the first hour after the numbers are printed. Plus, the commodity currency has a good chance of extending the move if risk sentiment leans the same way.
That is, a strong jobs release while risk-on flows are present could spur a lasting intraweek rally for the Aussie. On the flip side, a downbeat figure while risk-off vibes are in play might mean a prolonged downtrend for the currency.
Leading indicators like the ANZ jobs advertisements report and PMI readings are hinting at a strong rebound in employment for August, which might then spur a rally for the Australian dollar during the release.
Whether or not the gains are sustained would likely hinge on the outcome of the next top-tier events, such as the U.S. PPI, retail sales, and Chinese data.
If risk appetite is the name of the game and Australia prints an upbeat jobs report, look out for long AUD opportunities against lower-yielding and safe-haven currencies like USD, JPY, and CHF.
Just stay on your toes for quick profit-taking action if risk-off flows return later in the day, especially against the dollar which has enjoyed strong rallies in the previous week and only a very slight pullback so far this week.
Potential Alternative Scenario:
Another downside surprise in Australia’s jobs data could strongly undermine RBA tightening hopes for the next few months, likely triggering a wave lower for the Australian dollar.
If risk aversion is already in play ahead of the release and extends its stay later on, AUD might be a prime candidate to short against the U.S. dollar or even against the British pound as the latest U.K. wage earnings data may prompt traders to keep their BOE rate tightening bias on the table for now.
