The Australian Dollar to US Dollar (AUD/USD) surges on surprising local job data

The Australian Dollar (AUD) rallied yesterday after jobs data released by the Australian Bureau of Statistics (ABS) indicated that job growth is at its highest since the 1980’s. While doubts surged around the validity of the data the surface result enough to raise confidence in the local economy in turn lengthening the odds of another cut in interest rates.

The unemployment rate fell to 5.8 per cent in November, its lowest level in almost two years and the total number of people with a job rose 71,400 in the month, beating economists’ forecast for jobs to fall by 10,000. It was the second straight month of gains with October enjoying a rise of 56,100.

The Australian dollar surged against the US Dollar (USD) after the release of the data on bets that the RBA would now be less inclined to cut interest rates further. After several days of decline on the back of poor commodity prices, the AUD/USD exchange rate bounced back above 0.73 following the job announcement. The AUD to USD exchange rate soared to reach a peak of 0.7333 at 11:45am Thursday; a huge lift from 0.7203 cents earlier in morning. Gains eased in afternoon trade as concerns were raised as to the validity of the figures due to sampling issues. The ABS has had trouble with its jobs survey in the past that resulted in large revisions in both directions.

The RBNZ cuts rates and the New Zealand Dollar rallies on confidence of no further cuts

As expected the Reserve Bank of New Zealand (RBNZ) cut the official cash rate to 2.50% at their December meeting yesterday. The cut was widely anticipated and aimed at combating disruptions in the global dairy market and keeping inflation within target.

The result on the currency however was not as expected. The NZD surged following the announcement on the back of hawkish comments made by RBNZ Governor Graeme Wheeler indicating that he believes the rate cut – the fourth in a year – will be sufficient.

Elsewhere overnight, the Bank of England (BoE) released its final bank rate vote for 2015 voting 8-1 in favour of keeping interest rates on hold at the current historical low of 0.5% and its asset purchase target unchanged. The result itself was as expected, following the UK’s recent run of below target inflation figures and dovish remarks from BoE chair Mark Carney. The accompanying summary also contained few surprises, with the BoE pointing to slow inflation driven by the new fall in oil prices and slower wage growth in its reasoning for keeping interest rates on hold. Economists feel that the bank might be waiting to see what the U.S. Federal Reserve does next week and Governor Mark Carney seems in no rush to make a move as inflation still remains so low.

With no real data of importance due out locally today we can expect a fairly stable day for the “Aussie”. With the December US Fed meeting just around the corner the overnight release of high tier production and sales figures may drive some movement as investors continue to carefully dissect US data for guidance on a launch date.