Jobs Decline Shores Up RBA Rate Cut Bets
AUD
The Aussie Dollar opens weaker across the majors, reversing strong gains from Wednesday, following the release of labour market indicators that strengthen the case for the Reserve Bank of Australia to ease monetary policy. Although the Unemployment Rate remained steady for the third consecutive month at 4.1%, job figures disappointed. Total employment fell by 2.5k to 14.6 million, defying expectations of a 25k increase and marking the first monthly drop since February. Markets are now pricing in an 80% probability that the RBA will lower its key interest rate by 25bps to 2.6% at the July 8 meeting, with 2 additional cuts anticipated later in the year. Asian equities finished down on the day, with the Hang Seng -1.9%, Nikkei -1.0% and Shenzhen -0.8%. Locally the ASX lost -0.1%, with materials and technology leading losses at -1.8% and -1.1%. Gold and Silver were unchanged. Iron Ore gained +0.4%. Later today, China is likely to keep the 1Y and 5Y Loan Prime Rates unchanged at 3% and 3.5% respectively, after rolling out sweeping monetary easing measures a month earlier to aid the economy. A framework agreement covering tariff rates between Washington and Beijing has raised optimism the world's two largest economies can get business activity back on track, reducing the urgency for additional easing measures.
USD
AUDUSD bottomed out at 3-week lows of 0.6445 overnight before reclaiming some ground to open today at 0.6483. This comes after soft Aussie employment data dragged the AUD lower, while the USD held firm as the threat of a broader Middle East conflict kept investors jittery. U.S. equity futures traded lower overnight as speculation increased around U.S. involvement in the Middle East conflict. The S&P 500 futures closed -.9% on the shortened Juneteenth session while cash and bond markets were shut. No US data released yesterday with the Juneteenth holiday. Tonight, we'll see the Philly Fed Manufacturing Index. The next key event will be Flash PMIs, on Monday evening.
EUR
AUDEUR touched 1-week highs of 0.5671 yesterday morning before falling 0.9% to 0.5621 lows on the back of softer Aussie employment data, kicking off today at 0.5633. The DAX and CAC fell -1.1% and -1.3% respectively. Little Eurozone data yesterday or today, with only German PPI this evening. Flash PMIs are set for release on Monday.
GBP
Early yesterday morning, AUDGBP touched 4.5-week highs of 0.4851, then stooped over -1% to 0.4800, opening today at 0.4810. The FTSE fell -0.6%. As expected, the Bank of England kept the Official Bank Rate on hold at 4.25%. Six out of nine members opted to hold rates, while 3 voted for a 25bps cut (this cut is now widely expected at the August meeting). The central bank noted "Underlying UK GDP growth appears to have remained weak, and the labour market has continued to loosen, leading to clearer signs that a margin of slack has opened up over time". The interest rate hold was largely due to elevated global uncertainty as well as energy prices increasing due to the conflict in the Middle East. This afternoon, UK Retail Sales are expected to post a -0.5% reduction month-on-month.
NZD
AUDNZD briefly hit 3-week highs of 1.0834 yesterday before falling off a little to open at 1.0808. Yesterday, quarterly GDP posted a 0.8% increase, exceeding 0.7% expectations. The Kiwi economy is rebounding towards better health, however, it's still 1.1% smaller than it was a year ago, with warnings of tough choices ahead.