Australian employment Preview: Little can change RBA’s dovish stance

Australia will release this Thursday its October employment data. The economy is expected to have added 15.0K new jobs in the month, following a 14.7K increase in September. The unemployment rate is expected to tick higher to 5.3%, despite the participation rate is foreseen steady at 66.1%.

In September, the country added 26.2K full-time positions, while part-time jobs decreased by 11.4K. The composition of the headline figure is also relevant as the more full-time jobs, the better is for the economy.

Wages’ growth below trend for over seven years

Ahead of the event, however, the Australian Bureau of Statistics released the Q3 Wage Price Index, which was up in the quarter by 0.53%, meeting the market’s expectations. When compared to a year earlier, it was up by 2.2%, below the previous 2.3% and also missing the market’s forecast.  Those numbers confirmed that wages are stagnated below the long-term growth rate of 3.2%, a level seen over seven years ago.

Whatever the result is of the jobs’ report, the sluggish wages’ growth should maintain the RBA in the easing path. If the numbers disappoint, pressure on policymakers will mount. RBA’s Governor Lowe signalled a pause in the easing cycle earlier this month, and speculative interest believes that the RBA is done for this year, particularly considering cutting rates may backfire and dent consumption.

 AUD/USD possible scenarios

The employment report would likely trigger some action in AUD/USD, mostly if the numbers diverge from the market’s expectations. A better-than-expected report could help the Aussie advance, although, given its bearish trend, the movement will likely be short-lived, with sellers waiting at higher levels. Worse-than-anticipated figures, on the other hand, would exacerbate the dominant bearish trend.

Conclusion

As it has been happening in the last few months, unless the final numbers post a wide divergence with the market’s forecasts, the report will have a limited effect on the Australian dollar, with more chances of a bearish run in the case the report misses, than of a rally in the case it surprises to the upside.