The Australian and New Zealand Dollars are trading lower shortly before the release of the Australian Employment Change and Unemployment rate reports. These reports should determine whether the Reserve Bank of Australia cuts its benchmark rate in June or August. In its last policy statement, the RBA emphasized the importance of the labor market on the strength of the economy.
Traders are looking for the employment change report to show the economy added 14k jobs in April. This is down from 25.7k. The unemployment rate could tick up to 5.1%. The closely watched participation rate is expected to come in unchanged at 65.7%.
Analysts at Westpac said, “Last week, the RBA Board stated that it ‘will be paying close attention to developments in the labor market at its upcoming meetings.’”
They expect a modest employment change of 10K for April, with a consensus at 15k.
TD Securities is calling for a mild increase in the unemployment rate to weigh on the Australian Dollar.
“Employment in the early months of 2019 has been strongly tilted towards full-time (112k vs -41k) and so the seasonally-neutral April report may have a decent +17k lift in jobs, but the odds are tilted towards them all being part-time. In the May 7 Policy Statement, the RBA made clear it is firmly focused on further progress in lowering the unemployment rate. We look for a small lift to 5.1%, nothing to a central bank, but combined with a fall in full-time employment could temporarily weigh on the AUD and give July OIS rate cut odds a boost.”
To Recap Last Week’s Events
On May 7, the Reserve Bank of Australia left its official interest cash rate unchanged for the 33rd consecutive month, a little more than a week ahead of the Federal election. The rate is 1.5 percent, the same as August 2016.
In doing so, Reserve Bank Governor Philip Lowe said the decision to extend Australia’s longest-ever period of steady monetary policy followed below-target inflation, steady employment growth and a nationwide housing downturn.
“The Board judged that it was appropriate to hold the stance of policy unchanged at this meeting,” he said in a statement.
“In doing so, it recognized that there was still spare capacity in the economy and that a further improvement in the labor market was likely to be needed for inflation to be consistent with the target.”
“Given this assessment, the Board will be paying close attention to developments in the labor market at its upcoming meetings.”
Last week, RBA Governor Philip Lowe made it clear a further improvement in the labor market was needed to get the economy rolling again toward its full potential.
This article was originally posted on FX Empire
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