Australian Dollar slides back closer to one-week low vs NZD on dismal Aussie jobs report

AUD/NZD struggles to build on the previous day’s uptick and attracts fresh sellers on Thursday.
The disappointing Australian jobs data tempers RBA rate hike bets and undermines the Aussie.
Expectations for a more hawkish RBNZ support the NZD and also contribute to the intraday slide.

Haresh Menghani FXStreet

The AUD/NZD cross meets with a fresh supply during the Asian session on Thursday and slides closer to the previous day's low, around the 1.2150 region in reaction to the disappointing Australian employment data.

The Australian Bureau of Statistics (ABS) reported that the Unemployment Rate unexpectedly rose to 4.5% in April from 4.3% in the previous month. Additional details revealed that the number of employed people fell by 18.6K during the reported month, missing consensus estimates for a rise of 17.5K and well below the 17.9K growth recorded in March. The disappointing readings might have tempered market bets for further rate hikes by the Reserve Bank of Australia (RBA), which, in turn, undermines the Australian Dollar (AUD) and weighs on the AUD/NZD cross.

The New Zealand Dollar (NZD), on the other hand, draws some support from a more hawkish shift in the Reserve Bank of New Zealand's (RBNZ) outlook. In fact, investors now seem convinced that the central bank would maintain a cautious stance or consider tightening to bring inflation back to the 2% midpoint. This turns out to be another factor exerting pressure on the AUD/NZD cross. However, the lack of strong follow-through selling warrants some caution before positioning for an extension of the recent pullback from the highest level since March 2013.

Economic Indicator

Unemployment Rate s.a.

The Unemployment Rate, released by the Australian Bureau of Statistics, is the number of unemployed workers divided by the total civilian labor force, expressed as a percentage. If the rate increases, it indicates a lack of expansion within the Australian labor market and a weakness within the Australian economy. A decrease in the figure is seen as bullish for the Australian Dollar (AUD), while an increase is seen as bearish.

Why it matters to traders?

The Australian Bureau of Statistics (ABS) publishes an overview of trends in the Australian labour market, with unemployment rate a closely watched indicator. It is released about 15 days after the month end and throws light on the overall economic conditions, as it is highly correlated to consumer spending and inflation. Despite the lagging nature of the indicator, it affects the Reserve Bank of Australia’s (RBA) interest rate decisions, in turn, moving the Australian dollar. Upbeat figure tends to be AUD positive.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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