Just after midnight (GMT) markets got to know really important for Australian dollar and future RBA policy job report. Although main data was stronger than expectations, AUD in the end decreased. Why did it happen? You can find the answer in this article!
Positive gain of employment not enough for RBA?
Before we go to description of data and whole situation, take a look at AUDUSD M5 chart. Candle marked red is initial reaction of Aussie to the data – it’s clearly bullish. Then price reversed and when European traders joined the market (rectangle), depreciation was even quicker.
The result of January job report:
- Employment change: +13.5K vs +10K expected, prior +13.5K (revised up to +16.3K)
- Unemployment rate: 5.7% vs 5.8% expected, prior 5.8%
In both cases we see better results so why AUD started weakening? There are few details noticeable after thorough reading the report:
- In case of full employment report missed the expectation: 10K vs 16.3K expected, prior 13.5K
- Unemployment rate decrease, however in last 12 months a lot of employees totally exited the job market – depreciation of participation rate and number of employed compared to full population
- Rate of employed in the population decreased in last decade
Employment trend is growing but too slow – in this pace RBA will not feel comfortable enough to raise interest rates. This is the main issue and it led to depreciation of AUD.
On the chart above we can see that the number of people working is rising but pace is too slow for RBA. Trend line on the right chart starts to move up. JP Morgan analytics think that job market in Australia lost a lot of initial enthusiasm and the problem is focused mainly in services sector.
Take a look at AUDUSD and AUDNZD charts:
