Australian Dollar, AUD/USD, Jobs, Unemployment, RBA, Fed, BoJ – Topics of Conversation
- The Australian dollar inched up after an astounding job read
- Today’s data could prompt the RBA to follow other central banks on big rate hikes
- If the AU CPI beats higher, the outsized RBA raises will provide a boost AUD/USD?
The Australian dollar got little help from a stellar jobs report today and the RBA may have to hike rates well over 50 basis points at its next meeting in August.
The unemployment rate in June was 3.5% versus 3.8% forecast and 3.9% previously.
The total change in employment for the month was a massive 88.4k instead of the expected 30k. Full-time employment rose by a whopping 52.9k, while part-time jobs added 35.5k in June.
The participation rate increased from 66.7% to 66.8%, exceeding the expected 66.7%. The magnitude of the good news in this report cannot be overemphasized but can be overlooked. The market continues to look ahead and sees storm clouds gathering.
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US CPI was released overnight and came in at a shocking 9.1%. This is a nightmare for the Fed trying to target 2%.
Stuck inflation is far worse for an economy than a recession or two. Recession fears may eventually give way to hyperinflation concerns.
The train seems to be pulling out of the station and the Fed is desperately chasing it, with the market now pricing in more than 75 basis points for the next rate hike from them.
The Bank of Canada gained 100 basis points overnight and the RBA could consider something similar if the second-quarter CPI comes in as hot as expected in two weeks.
If we break down Australia’s quarterly CPI numbers, another shocking inflation report could be lurking.
The CPI for the second quarter of 2021 was 0.8% and this figure will fall below the CPI reading recorded on March 27th July. The CPI for the first quarter of 2022 was 2.1%.
The first 3 months of the year includes only 1 month of massive increases in commodity prices, especially energy and food. The largest increases in production costs have not yet been fully passed on to consumers.
If we assume that the CPI arrives in the second quarter of 2022 at the same rate as in the first quarter (2.1%), the annual figure is 6.3%.
Given the extraordinary surge in energy, food and building materials in the second quarter of this year, there’s a strong chance of a much higher figure.
The RBA could have a jumbo hike at their next meeting on Tuesday, the 2ndnd August.
Whether this translates into higher AUDUSD remains to be seen and global machinations will continue to affect the Aussie.
AUD/USD 1 MINUTE CHART
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— Written by Daniel McCarthy, Strategist for DailyFX.com
To contact Daniel use the comments section below or @DanMcCathyFX on twitter
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