The Australian Dollar "Can No Longer Escape The Sell-Off" as Australian employment report was surprisingly downbeat

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Category: Australian Dollar News

Written by Sam Coventry

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UBS stick to their forecast that the RBA will cut the cash rate again by 25 bp in August.

The Australian dollar (Currency:AUD) is witnessing an aggressive rinsing on the foreign exchange market place this morning.

The Australian dollar vs US dollar rate is over a percent down at 1.0147, the pound vs Australian dollar exchange rate is 0.81 pct higher at 1.5241.
 
"So the AUD has awoken from its slumber and finally began to sell off; the charts suggest that this could be a pretty significant move given the overbought conditions from where it begins and the divergence on the momentum oscillators," says William Moore at RBS.


The Australian employment report was surprisingly downbeat with employment posting a decline of 27K in June.

"Indeed, an increasing division between resource and non-resource led activity within the Australian economy and the recent Chinese slowdown could lead the RBA to ease further," says a morning comment from Danske Bank.

As UBS point out, the employment report for June disappointed on a number of fronts: overall employment fell -27k (cons. 0k) and the job losses were entirely of the full-time variety.

The unemployment rate ticked higher to 5.2% as expected although the participation rate also dropped slightly.

"Our Australia economists conclude that the data – and the recent relapse in leading indicators of employment – suggests the unemployment rate will rise further and so they stick to their forecast that the RBA will cut the cash rate again by 25 bp in August, assuming Q2 CPI is low enough," says Gareth Berry at UBS.