Keynotes;
Australia is set to release the jobs report figures on the 19th of August 2021. The market expects the data to show that 46,200 jobs were lost during the month of July, while unemployment is expected to increase by 5% from 4.9% in June. in addition to this, the participation rate is set to contract from 66.2% to 66%. The jobs report will definitely reflect the impact of the delta-related lockdown regulations in the country. We have already seen New Zealand making a U-turn on its decision to hike rates as the country enters lockdown after just one case of delta variant.
The expected declines in the employment report are associated with the recent lockdown regulations in the country. The delta variant has been a major issue in many countries recently after leaving India with so much damage. Australia has now been acted after managing to control the spread of the virus throughout this year until June 2021 but the control is showing the difficulty of control the spread of the delta variant. With over 80% of the population under lockdown in Australia, it is evident that the country is struggling, the number of new cases and the number of death continues to rise daily.
The latest data from the ABS shows that the wage growth has declined to 0.4% in the June quarter, down from 0.6% in the 2nd quarter. The Reserve bank of Australia has stated that one condition for an interest rate hike is that wages grow at an annual pace of 3%. Whereas the inflationary pressures in the country keep climbing high. At the present moment inflation in Australia stands at 3.8% showing that the real wages are weakening. However, this might not be considered the best scenario for economic recovery progress.
With all the headlines above, it is highly unlikely that the Australian employment report can beat expectations and even if it does, the report might not be enough to uplift the Australian dollar against the US Dollar.
Ahead of the employment report, The Aussie/US Dollar is trading near 2021 low as the price attempt to make its way to the 2020 lows. The support level at 0.72250 is very crucial ahead of the data. The market is expecting a disappointing jobs report and should the numbers come out showing a weak employment report, we could see the Aussie losing the battle and break the support level. On the other, should the data beat expectations the Aussie could get a bit of lift-up but won’t sustain as the dollar is strong ahead of the FOMC.
LULAMA MSUNGWA
Research & Markets Analyst
Scope Markets
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