Higher Australian Employment Fails to Support AUD/USD Exchange Rate

The Australian Dollar has slipped against the US Dollar today, with the US Dollar being pushed up by forecast-beating inflation figures.

The latest US consumer price data has generated optimism with relation to next week’s Federal Reserve interest rate decision.

Australian Dollar Backed by Growing Australian Employment

Today’s headline Australian news has been that employment is improving across the country.

This has been dubbed a ‘jobs boom’ by some, but has not been good enough to keep the Australian Dollar up against the US Dollar.

The latest figures showed a 54.2k person rise in overall employment, which included a 40.1k increase in full-time employment.

This latter statistic was considered especially supportive as full-time work generally leads to higher paid, more stable positions and greater economic contributions.

Participation levels were also up, but underemployment remains an issue. The underemployment rate, measuring workers who can and wish to work more hours, remains near a record high.

Looking at the figures, Paul Dales of Capital Economics summarised that;

‘[Underemployment] needs to fall to around 12% before we can say that there is a ‘normal’ amount of spare capacity in the labour market.’

‘As such, while faster employment growth will put more money in households’ pockets, it probably won’t translate into much faster wage growth’.
Nevertheless, this has been solid, positive data for Australia that may push the AUD/USD exchange rate up if future US data disappoints.

US Dollar Bolstered by Rising Inflation

The latest US inflation data has pushed the AUD/USD lower.

On the year in August, US inflation has risen to 1.9% for the base figure. The more accurate core reading has not changed, but by remaining at 1.7% this has also beaten forecasts for a decline.

Some believe that this news could push the Federal Reserve into considering higher interest rates.

AUD/USD Forecast; Will RBA Meeting Minutes Boost Australian Dollar Appetite?

For the week to come, the Australian Dollar US Dollar exchange rate could be influenced by Reserve Bank of Australia (RBA) minutes.

Coming on Tuesday, these minutes will cover the RBA policy meeting from earlier in September.

If the minutes show that RBA policymakers see improving employment as a prerequisite for higher interest rates then the Australian Dollar could rally.

On the other hand, however, if the central bank remains committed to a ‘wait and see’ attitude then the Australian Dollar could be devalued.

Major upcoming US news will come tomorrow, as well as Wednesday next week.

In the former case, US retail sales figures are out on Friday and are forecast to slow. This result would imply lower economic activity, which may mean that the US Dollar slips.

Further ahead, the Federal Reserve interest rate decision on Wednesday evening could bring high USD volatility.

US interest rates are not forecast to change, but the central bank could still provoke USD turbulence with any statements on monetary policy.

There are still faint hopes that the Federal Reserve could raise interest rates for a third time in 2017, so any evidence to the contrary may trigger a US Dollar decline.

Rewan Tremethick