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Key Data Points to a Soft Australian Payroll Number
Earlier this month the RBA raised the Cash Rate for the 6th time out of the previous 7 meetings, pushing the rate to 4.50%, a 4.25% differential between themselves and the FED Fund Rate. This was widely anticipated by market participants as the Consumer Price Index, Producer Price Index and MI inflation all showed positive numbers during April’s announcements. However, the main focus was not on the rate hike itself, but on the post rate statement by Governor Stevens where he noted that “as a result of today’s decision, rates for most borrowers will be around average levels. This represents a significant adjustment from the very expansionary settings reached a year ago.” Traders took this as a dovish rhetoric and an indication of a halt in the RBA’s rate hike cycle.
Yesterday we saw Australian Business Confidence fall in April by 3 points, whilst at the same time ANZ Job Advertisement m/m decline to -1.2% for the first time since January. Retail Sales for April showed a softer reading of 0.3% instead of the 0.8% anticipated, it is no surprise that with retail sales down the number of advertisements for job vacancies declined as mentioned above. It appears that the detractors of Governor Steven’s hawkish approach to interest rate hikes may have some grounding as tighter monetary policy seems to have cooled domestic growth. Consequently we anticipate a soft number for tonight’s payrolls, and may present a short opportunity a negative number will coincide with the negative sentiment that currently surrounds the global financial recovery. A reading of 22.6k jobs created is forecast, so a significant surprise to the downside will induce AUD/USD selling as traders continue to look for opportunities to short risky assets. However, in the longer term we remain bullish AUD/USD as the interest rate differential remains wide, the economy is in good shape, and finally after yesterday’s positive prospective budget plans look set to bring their $40bn deficit to a surplus by 2012-2013 – 3 years ahead of forecast.
Published on Wed, May 12 2010, 21:23 GMT