What a wipeout for the Aussie! The Land Down Under printed weaker than expected jobs figures for January, pushing the Australian dollar lower against its forex counterparts. Check out these main takeaways to figure out if the currency might be in for more losses:
1. Headline figures missed expectations
Analysts were already expecting to see a 4.7K drop in hiring but were surprised to find out that the economy actually lost 12.2K jobs in January. As it turns out, full-time employment fell by 28,100 while part-time hiring picked up by 15,900 during the month.
Meanwhile, the jobless rate jumped from 6.1% to 6.4% – its highest level in a decade. The labor force participation rate was unchanged at 64.8%, which means that the increase in the jobless rate really reflected a downturn in employment for the period.
2. RBA already hinted at hiring slowdown
What’s interesting about this latest employment report is that the RBA already hinted at weaker than expected results during their interest rate statement last week. Governor Stevens mentioned that they are expecting a prolonged downturn in hiring, predicting that the unemployment rate could peak a little higher than previously estimated. Looks like they already saw these weak jobs figures coming!
3. Another RBA rate cut likely?
With that, forex market watchers seem to be pricing in a higher possibility of seeing another RBA rate cut in their next policy decision. After all, weaker hiring prospects could lead to lower consumer confidence, which might weigh on spending and growth later on.
Aside from that, employment growth doesn’t seem to be staying in pace with population growth. National Australia Bank senior economist David de Garis noted that the working age population is growing by 1.75% per month while the economy is only adding 1.5% in jobs growth, creating a gradual increase in unemployment.
These factors could prompt the RBA to step up its easing efforts in order to prevent further economic weakness. According to data from Reuters, analysts estimate the probability of a rate cut to be 60% in the March RBA statement and over 90% in the April announcement. Do you think that this will pull the Aussie down under in the coming weeks?