Australian Employment Preview: Job creation to add pressure on the RBA

The monthly Australian job report will be out on Thursday, March 16. The country is expected to have added 48.5K new positions in February after losing 11.5K in January. Market players anticipate the unemployment rate will decrease to 3.6% from 3.7% in the previous month, while the participation rate is seen ticking up from 66.5% to 66.6%.

Just ahead of the release of the employment figures, the country will publish March Consumer Inflation Expectations, as estimated by the Melbourne Institute, foreseen increasing to 5.4% from 5.1% in the previous month.

It is worth noting that the Australian Wage Price Index, as estimated by the Australian Bureau of Statistics, rose 0.8% in the final quarter of 2022. The official report also noted that “through the year growth for the sector lifted to 3.6%, the highest rate recorded for the sector since September quarter 2012.” The figures mean it will take time to tame inflation.

Reserve Bank of Australia turning cautious

The fresh employment and inflation figures came a week after the Reserve Bank of Australia (RBA) announced its latest monetary policy decision. The central bank increased the Official Cash Rate (OCR) by 25 bps to 3.6%, a tenth consecutive rise. Governor Philip Lowe & co, however, turned cautious as the accompanying statement showed policymakers removed the reference to needing multiple rises in coming months.

“The board expects that further tightening of monetary policy will be needed to ensure that inflation returns to target and that this period of high inflation is only temporary,” Lowe added.

In the middle, a banking crisis came as cold water.  It started with a couple of regional United States banks, but news on Wednesday indicated that Credit Suisse had found “material weaknesses” in its financial reporting processes for 2022 and 2021. The funding crisis is directly linked to central banks’ aggressive monetary policy tightening, resulting in plummeting government bond prices and increased borrowing costs. Risk-off dominates financial boards ahead of Australian employment figures.

AUD/USD possible scenarios

The AUD/USD pair is sharply down on the day amid the risk-averse scenario and trades a handful of pips above the 0.6600 figure. An upbeat report could help it recover some ground, although the sour sentiment extends throughout the different sessions, the bounce could be short-lived, and the pair would resume its decline once the dust settles. A strong static resistance area comes in at around 0.6710, where the pair topped a couple of times this week.

On the other hand, if the figures miss market expectations, the slump will likely accelerate alongside the previous trend. The pair has immediate support at around 0.6610, with a more relevant one at 0.6563, March monthly low and a level that was last seen in November 2022.