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12 Dec 2024
AUD/USD rebound halts at 0.6425 and keeps the bearish trend intact
- Australian Dollar recovery has met resistance at 0.6435, and a steady USD is weighing on Aussie's upside attempts.
- Strong Australian employment figures accelerated AUD's recovery earlier today.
- US PPI and Jobless claims data is expected to reiterate the US economic exceptionalism and support the Dollar.
The Australian Dollar accelerated its rebound from year-to-date lows following stronger-than-expected Australian employment data seen earlier today. The pair, however, has met resistance at 0.6430. which keeps the broader negative trend intact.
Australian employment showed a net increase of 36.6K in November, well above the 25K forecasted by the market and also above the downwardly revised 12.1K in October.
The Unemployment Rate has posted another positive surprise, with a decline to 3.9%, the lowest level since March against market expectations of an increase to 4.2%. The jobless rate had remained steady at 4.1% since last summer.
The US Dollar remains firm on positive US data
These figures have offset the impact of Tuesday’s dovish-tilted RBA monetary policy statement but, so far, are showing insufficient to counter the pair’s bearish trend.
The US Dollar Index, which measures the Greenback against the six most traded currencies, remains steady near two-week highs, supported by higher US yields.
US consumer inflation accelerated in November at its fastest rate in seven months. Later today, US Producer Prices Index and Jobless Claims data are expected to endorse the US exceptionalism rhetoric.
Employment FAQs
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.