News Column

Aussie Falls as Unemployment Rate Rises to Ten Year High

February 12, 2014

Daniel Giardina

Talking Points:

  • Australia's unemployment rate rose to 6.0% in January, the highest in ten years
  • Aussie dollar drops against the US Dollar following Aussie data release
  • A weak labor market weighs on the RBA's interest rate prospects

    The Australian dollar tumbled lower against the US Dollar this morning after it was reported the Australian economy lost 3,700 jobs in January, missing expectations for a 15,000 increase. The Aussie dropped 67 pips from 0.9011 to 0.8942, curbing its upward momentum through the past few weeks. Overall, 7,000 full time jobs were lost, and only 3,400 part time jobs were added, however, both employment figures missed expectations. Far more concerning for traders and policy makers was the unemployment rate ticked up to 6.0%- the highest level of joblessness since 2003 - compared to 5.8% in December.

    Last week, Reserve Bank of Australia Governor Glenn Stevens kept the main cash rate on hold at 2.50%, as well as left out a key statement saying the exchange rate is "Uncomfortably High". Along with the notable softening of rhetoric towards the option and implicit proximity of further rate hikes, the markets took this to mean the central bank was abandoning its rate cut regime - a precursor move to an eventual hawkish outlook. However, with a weak labor market, the prospects of the RBA hiking interest rates are looking weaker or at the very least further in the future than some bulls/hawks were looking for.

    Aussie_Falls_as_Unemployment_Rate_Rises_to_Ten_Year_High_body_AUD_employment_data.png, Aussie Falls as Unemployment Rate Rises to Ten Year High

  • For more stories on investments and markets, please see HispanicBusiness' Finance Channel

    Source: DailyFx

    Story Tools