SYDNEY: The Australian dollar got only a brief blip higher on Thursday after data showed a surprisingly strong jump in jobs in December, as a rise in unemployment was seen keeping alive the chance of a near-term cut in interest rates.
Both the Aussie and New Zealand dollars had already rallied on Wednesday after a benign reading on core US inflation pulled down Treasury yields and the US dollar.
Thursday’s figures showed Australian employment climbed 56,300 in December, dwarfing forecasts for only a 15,000 increase.
Yet the jobless rate still ticked up to 4.0% as even more people went looking for work.
With strong demand for labour being met by strong supply, in part from migration, wage growth is actually slowing and limiting any impact on inflation.
As a result markets were still implying around a 70% chance the Reserve Bank of Australia will cut its 4.35% cash rate by 25 basis points when it next meets on Feb. 18.
The deciding factor is likely to be fourth-quarter consumer price figures due later this month where analysts are hopeful core inflation will rise by 0.6% or less, the smallest increase since mid-2021.
“The trend in the labour market is meaningfully better than the RBA forecast,” said Taylor Nugent, a senior market economist at NAB. “At the same time, the labour market has not been particularly wage inflationary.”
“NAB’s call remains a rate cut in May, but February is live given the inflation data is not expected to stand in the way of a cut.”
The lack of clarity on rates left the Aussie steady at $0.6225, having bounced 0.5% overnight and further way from the recent five-year low of $0.6131. Resistance lies around $0.6245 and $0.6301.
The kiwi dollar held at $0.5618, after edging up 0.2% overnight, though it failed to hold a top of $0.5651.
Support lies at the recent two-year trough of $0.5544, with resistance at $0.5692.
Australia, NZ dollars Struggle near two-year lows, data on help
Bonds enjoyed a relief rally in the wake of the US inflation report with three-year futures jumping 9 ticks to 96.050, while 10-year yields down 10 basis points at 4.525%.
In New Zealand, key two-year swap rates slipped 7 basis points to 3.565% and are indicating around an 80% probability the cash rate will be cut by 50 basis points in February.
The outlook might become clearer when the chief economist at the Reserve Bank of New Zealand gives a speech on Jan. 29.
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