RBA: Xmas rate cut is not ruled out – UOB


Lee Sue Ann, Economis at UOB Group, assessed the recent results from the Australian labour market.

Key Quotes

“Australia’s unemployment rate climbed to 5.3% in October, disappointing market expectations for it to hold at 5.2%. Total employment fell by 19,000 in October, from a revised 12,500 gain in September, way below expectations for a 15,000 increase. This was the largest drop in employment since September 2016 and only the second monthly drop since then… The labor force participation rate also unexpectedly declined to 66.0% from 66.1%. Highlighting the labor market slack, the underutilization rate, which combines unemployment and under-employment, rose to 13.8%”.

“The latest labour market report clearly does not bode well for the Reserve Bank of Australia (RBA)’s overall assessment of the Australian economy, of which the RBA has made its message clear about how closely it is watching the labour market”.

“Concerns about household spending were highlighted by official figures yesterday (13 November) which showed wages growing less than expected in the last quarter. Australia’s wage price index rose 0.5% q/q for 3Q19, down slightly from 0.6% in the three months to March, whilst year-on-year growth moderated to 2.2% from 2.3%. Slack in the labour market has clearly weighed on wage outcomes, and will need to accelerate in order to meet the RBA’s subdued wage forecast. Previously, the RBA highlighted that wage growth of around 3.5% y/y would be needed to sustainably lift inflation back to the middle of their 2%-3% target band”.

“It was also in the RBA’s quarterly Statement on Monetary Policy, published on 8 November, that officials argued that it was “increasingly clear” that lower unemployment is needed to generate wages growth consistent with achieving their inflation target. These considerations, they noted, have pointed to the case for further policy easing in recent months and also suggest that the RBA’s bias remains in favour of further policy easing in the months ahead”.

“The next and final RBA meeting for the year is on 3 December, a day before 3Q19 GDP data is due for release. Although our forecast is for a steady official cash rate (OCR) of 0.75% for the rest of this year, a rate cut at the December meeting cannot be ruled out now, following the soft wages and employment reports”.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.

Feed news

Latest Forex News

Editors’ Picks

GBP/USD stays below 1.3350 on poor UK PMIs

GBP/USD hits fresh session lows of 1.3335 following an unexpected drop in the UK's Preliminary Manufacturing and Service PMI reports. However, the downside appears capped amid growing Brexit optimism. 

GBP/USD News

EUR/USD keeps range around 1.1130 on downbeat PMIs

EUR/USD trims gains to trade near 1.1130 region after the sentiment around the euro was dented by the disappointing German and Eurozone Preliminary Manufacturing PMIs. Trade concerns also keep the gains limited. 

EUR/USD News

The phantom of fear pierces crypto market foundations

Negative technical indicators are extremely volatile and are approaching a technical rebound. Ethereum has fundamentals in play versus Bitcoin which could be lethal. XRP is not immune to downfalls and adds to the dangerous game of critical supports.

Read more

Gold consolidates in a range, flat-lined around $1475 level

Gold extended its sideways consolidative price action through the early European session on Monday and remained confined in a narrow trading band near the $1475 region.

Gold News

USD/JPY: Holding on to higher ground but lacking momentum

Positive developments between the US and China keep the mood up. Japanese data mixed, industrial figures continue disappointing. USD/JPY needs to advance beyond 109.72, December monthly high.

USD/JPY News

Forex MAJORS

Cryptocurrencies

Signatures