The Australian Dollar gained 30 basis points against the dollar following the data from the Australian Bureau of Statistics. In the highly anticipated data, the economy added 16K jobs in January, beating the analysts’ estimates of 15.3K. At the same time, the unemployment rate remained unchanged at 5.5% in line with the analysts forecasts. This rate has stayed in the narrow range of 5.4% and 5.6% for six months in a low, which is an indication of a stable economy.
The participation rate remained unchanged at 65.3% in line with the estimates with female participation rising to an all time high.
The continued jobs growth represents the 16th months of straight jobs increases, something that happened last in 1976.
The bureau reported that the annual jobs growth rose to 3.3%, which is double to that of the United States. Full-time employment fell by 49,800 in January. This came after months of a strong run in full employment.
The Australian economy has been boosted partly by the rise in commodities which are the backbone of its economy. This year, the Bloomberg commodities index has risen by more than 3%, reversing the negative trends of the past years.
The continued strength of the economy, coupled with low inflation rate will force the Reserve Bank of Australia (RBA) to keep off rate increases until 2019. They have no incentive to start hiking. As I have explained before, central banks tend to raise rates when inflation starts to rise to contain it.
The bank seemed to confirm this last week when they argued that they were not inclined to start raising rates at a time when wages are not rising. Wage growth is a major problem that the Australian government is facing. In fact, a recent sectoral wage deals, known as enterprise agreements, fell short of the analysts’ forecasts.
Interest rates futures show a 50-50 chance of a rate hike later this year. Still, they have priced in a rate hike in March 2019, when they expect inflation to be near or above the target 2%.
In the past year, the Aussie has gained more than 5% against the dollar. This has been partly because of a weaker dollar, coupled with a sustained Australian economy. During this time, as shown below, the pair has established a strong support, which is shown in pink. At the same time, the pair has completed a full impulse Elliott wave and is likely starting an Elliott Correction Wave.
Later today, traders will focus on the Philadelphia Fed Manufacturing index which will be released 1330 GMT. Traders expect the manufacturing to slow to 21.1. They will also watch out for the PPI data, which they expect to grow by 3.3%. Finally, they will watch the Canadian dollar following the release of the ADP employment numbers.