Australian dollar strengthens
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The Australian dollar has risen Friday, buying 68.88 US cents, from 69.13 US cents on Thursday. Australia’s unemployment rate rose in April to the highest in eight months while full-time jobs fell, ABS data showed on Thursday, cementing views the central bank may be forced to lower rates soon to stimulate the economy.
Yesterday, the Australian dollar skidded 0.4 percent to 68.91 US cents, the weakest since early January when a currency “flash crash” briefly sent the Aussie to 67.43 US cents.
Financial markets are implying an almost 60 percent chance the Reserve Bank of Australia will ease policy next month.
The RBA is closely watching the employment report for clues on monetary policy, as it is counting on labor market strength for a long-awaited pick up in wage growth and inflation amid a continuing slide in property prices.
Thursday’s figures showed 28,400 new jobs were created in April, surging past expectations for a rise of 14,000.
But in an unwelcome sign, all of the increase was led by part-time work, with full-time declining 6,300.
Jobs are being created at a brisk annual pace of 2.6 percent, much faster than the 1.6 percent rise in population but that is still not enough to meet with surging labor supply.
The unemployment rate rose for a second straight month to 5.2 percent, when analysts had expected 5.1 percent, as the participation rate climbed to 65.8 percent indicating more people went looking for work.
More worryingly, forward-looking indicators of labor demand are now pointing to emerging weakness.
The National Australia Bank monthly employment index slipped last month, dragging down the Composite Employment Index to 51.4, the lowest reading since September 2016, from 53.4 in March.
A job index by Westpac has also turned down, suggesting that employment growth should slow to about two percent in the July-September period.
With the jobless rate inching up, lukewarm consumer prices and sputtering economic growth, the RBA will likely cut rates from a record low 1.50 percent.
Questions & Answers
Q.Why has the Australian dollar strengthened today?
Why has the Australian dollar strengthened today?
The article states the Australian dollar has risen today, buying 68.88 US cents, but does not provide a specific reason for this particular strengthening, only its movement from yesterday.
Q.What is the current outlook for interest rates in Australia?
What is the current outlook for interest rates in Australia?
Financial markets imply an almost 60 percent chance the Reserve Bank of Australia will ease policy next month. The RBA is likely to cut rates from a record low 1.50 percent due to the rising jobless rate and other economic factors.
Q.What were the key findings from Australia's latest jobs report?
What were the key findings from Australia's latest jobs report?
The unemployment rate rose to 5.2 percent in April, the highest in eight months, with full-time jobs declining. Although 28,400 new jobs were created, all the increase was due to part-time work.
Q.How do recent employment indicators suggest future weakness in the job market?
How do recent employment indicators suggest future weakness in the job market?
Forward-looking indicators are pointing to emerging weakness, with the National Australia Bank monthly employment index slipping and the Composite Employment Index hitting its lowest reading since September 2016. A Westpac job index also suggests employment growth will slow.
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