Australian Employment Data Centre Stage Today

AUD

The AUD has traded within tight ranges in the last 24hrs, marginally higher against the USD and EUR despite a sharp 2.5% drop in Iron Ore which, as our biggest export, would usually spell weakness for the AUD. Perhaps steering the ship to safety was improving risk sentiment as US Equities were green with the Dow Jones up +0.7%, whilst the S&P 500 and NASDAQ were both up +0.8%. Australia’s biggest customer China released poor Retail Sales data yesterday as YoY Retail sales came in at 2.5%, comfortably lower than the 7.0% forecast and well down on the 8.5% from last month. Still in China, and Industrial production printed at 5.3% against an expected 5.8% and prior 6.4%. Combining these poor results with a backdrop of disappointing China PMI data from a fortnight ago, risk assets in Asia were suffering with most equity indices trading in the red. Big data is due locally today, Australian Labour Force data for August will be released at 11.30am morning and will reveal the impact of the widespread and severe lockdowns all across the country in the first half of August. Markets are expecting a loss of ~80k jobs and an increase in the Unemployment Rate from 4.6% to 5%. With potential for large swings in the participation rate (the total number of people employed or seeking employment) to skew the headline unemployment rate, the number of hours worked will be watched carefully and may offer a more meaningful snapshot of the state of the labor force. For reference, the last two employment reports were better than initial market expectations and it's possible for a sizeable miss today at 11.30am.

USD

The AUDUSD pushing slightly higher into the morning as it currently trades at 0.7342 at time of writing. Yesterday the US released a variety of data including the US Empire Manufacturing Index for September, which rose to 34.3, up from 18.3 and easily beating expectations of 17.9. Released a little later, US industrial Production for August printed at 0.4% just lower than expectations of 0.5%. Markets are getting prepared for next week’s FOMC meeting, with US economic data failing to boost conviction in the reflation trade at the moment. So far, we have had poor outcomes in both the labour market conditions, CPI inflation and Industrial Production numbers for August, so it seems unlikely that the conditions in the economy will raise any hawkish crows. We’ll see if the poor run of data will continue tonight as well with Monthly Retail Sales, Unemployment Claims, and the Philly Fed Manufacturing Index all released later on.

EUR

The AUDEUR trading just a fraction higher at 0.6207 this morning. The Eurozone was able to produce some stronger data with Euro Zone Industrial Production being stronger than expected in July, rising to 1.5% from 0.6%, thanks to rising output of capital and non-durable consumer goods. It didn’t manage to help European Equities which took a breather from their recent highs, with the FTSE the best performing index, losing just -0.2%. The DAX was down -0.7% with other markets more than -1.0% lower at the closing bell. Later today we’ll see ECB President Lagarde speak, and as always with open questions at the end, volatility is not out of the question.

GBP

The AUDGBP is trading sideways despite the turbulent inflation data out of the UK yesterday, sitting at 0.5294 this morning. The UK’s CPI surged to 3.2% against forecasts of 2.9% in the 12 months to August, the largest ever month-on-month increase since records began in January 1997. The index jumped 2.0% in July on an annual basis. The Office for National Statistics, which published the data, noted that the surge was likely to be a temporary change as result of the Governments Eat Out to Help Out (EOHO) scheme, which offered customers half-price food and drink to help support small businesses. No data this evening.

NZD

The AUDNZD is lower throughout the morning, refreshing 17-month lows thanks to some strong Kiwi GDP data released just moments ago, with the pair trading at 1.0298. New Zealand Gross Domestic Product beat expectations by a mile coming in at 2.8% vs 1.3% expected for the second quarter. For the year, it was also beat with a score of 17.4% vs 16.3% expected. The strong data will likely give the RBNZ some extra confidence and closer to a rate hike at their next meeting in October. Aussie Employment data at 11.30am is the next big driver.