The antipodean currency pair of the Australian and US dollars has seen a sharp fall from its intraday height of 0.7470 after the Bureau of Statistics in Australia published the country’s unemployment figures to be at 4%. The unemployment figures in the country had been lower than the bets placed by the market at 3.9%, but it was similar to initial prints of 4%. Meanwhile, the country’s employment change dropped to 17,900, which is significantly lower than the estimated figure and the initial figure of 40,000 and 77,400, respectively.
AUD/USD price chart. Source TradingView
A higher rate of unemployment indicates an immobile labor market situation. It should be noted that the University of Melbourne came out with a publication of the speculated consumer inflation at 5.2%, which is notably higher than 4.6% which had been forecasted prior to that release.
It is now looking like the cumulative effect of the higher rate of consumer inflation as expected, as well as a stagnant labor market will be the result of a neutral disposition by Australia’s Reserve Bank. Investors are advised to be well aware that the Reserve Bank of Australia, for some reason, did not change its monetary policy in the past week, though it was expected.
The Governor of the Reserve Bank, Philip Lowe, gave directions that the Reserve Bank would be adopting what he called the “wait and watch” stance since, according to him, the present price pressure does not necessitate any swift need to increase interest rates for the time being. Nevertheless, it is speculated that the bank will announce an interest rate increase at a later time this year.
The USD Index
In the United States, on the other hand, the dollar index saw a large-scale sell-off on Wednesday following the nine days of winning streaks it had. The dollar index has, therefore, fallen sharply under the critical line of support at 100.00. The solid recovery that occurred on Wall Street on Wednesday played a huge role in underpinning a positive sentiment in the market as the concerns of increased inflation in the US dwindled. This helped riskier assets to gain more demands than usual.
Australia’s economy keeps gaining more foreign exchange as it is a major export of iron ore and other necessary base metals in high demand. China’s reduced exportation, however, is still a major source of concern.