Throughout the European trading session on Wednesday, the value of the AUD/USD currency pair jumped near to 0.6550. This significant increase was driven by optimism surrounding the Australian economy, combined with recent breakthroughs on the forex market. Inflation in Australia has picked up speed. Data from Q3 confirm that our growth rate keeps accelerating, as we jumped up to 1.3%. This figure comfortably surpasses the 0.7% increase seen in Q2 and points to a relatively strong economic climate.
Traders also appear to be positioning ahead of Thursday’s Australian employment figures. The markets are definitely on guard and on the lookout for the announcement. Analysts are calling for an increase to the labor market this October, with 20,000 new workers added. That is a jump from the 14,900 positions created in September. This larger than expected increase in employment figures could continue to add fuel to Australian dollar strength, making it even more attractive against the US dollar.
Stronger Australian Inflation Data
According to today’s inflation data, the Australian economy is on fire. Of course the annualized growth rate of 1.3 percent in the third quarter still shows a marked acceleration from recent quarters. Such growth can be misleading due to short-term factors related to consumer spending and widespread inflation within multiple sectors.
RBA Deputy Governor Andrew Hauser argued that there is an urgent need to close the output gap. He sees this gap as a sign that there remains a lot of untapped potential in our economy. He cautioned that the economy can’t “run above its potential,” raising red flags about our ability to achieve sustainable growth in the future.
These inflation figures are highly consequential. They might have a powerful impact on the Reserve Bank of Australia’s (RBA) monetary policy decisions. An increased inflation rate is likely to lead the RBA to raise the cash rate. This will better equip them to take on-dash economic conditions.
Anticipated Employment Data
The major labour market release in the week ahead is likely to add to the understanding of how strong Australia’s economy remains. Job creation financial analysts are projecting a net gain of about 20,000 jobs for October, a welcome turnaround from the dismal numbers from September. This hire up is a reflection of an encouraging employee outlook and should provide further support to the AUD.
The investment community should be watching these developments very closely. More good news on the employment front would lead to greater consumer expenditures and faster GDP growth. The next batch of data is extremely important to market participants and can materially influence currency traders’ strategies in the forex market.
US Dollar Struggles Amidst Mixed Performance
The Australian dollar is getting stronger. At the same time, the US Dollar Index (DXY) is near its weekly low of around 99.30, reached on Tuesday. The mixed performance of major currencies against the USD makes for a complicated backdrop for traders to take into account.
The heat map indicates that the AUD has strengthened moderately on the day, up +0.10% vs. the USD. In comparison, other currencies are facing instability across the board. On the day, the EUR is up by +0.02% vs USD, even as the JPY is -0.37% lower. The GBP and CAD are both down at -0.07% and unchanged at 0.00% on the day for good measure.
In line with the AUD’s strengthening, other currencies too showcase a mixed bag across many currency pairs, indicating a varied story against one another. As of this writing, the EUR is up +0.10% against the GBP. Meanwhile, it has only appreciated slightly compared to the USD.
“We need to close the output gap.” – RBA Deputy Governor Andrew Hauser
“We need to run above its potential.” – RBA Deputy Governor Andrew Hauser