Australian dollar latest: AUD holds gains amid JUMP in unemployment
ALTHOUGH the Australian dollar strengthened against currencies like the US dollar in the wake of the Federal Reserve’s interest rate decision, concerning Australian employment figures saw AUD exchange rates edge away from their best levels.
Before the Fed announcement the USD/AUD exchange rate was trading in the region of AU$1.31, but the pairing slid to AU$1.295 as the US dollar broadly weakened.
Although the Federal Reserve did hike interest rates, the move was so expected that the US dollar had already gained as much as it could in the build up to the decision.
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As the Fed remained slightly cautious and failed to provide much of an idea of when interest rates might be increased again, demand for USD dipped and higher-risk currencies like the Australian dollar were able to climb.
The heightened appeal of riskier currencies also saw the GBP/AUD exchange rate fall from a high of AU$1.612 before the Fed announcement to a low of AU$1.592.
However, the Australian dollar wasn’t able to extend its gains after domestic employment data caused concern.
Federal Reserve's Janet Yellen explains hike in US Interest rates
Economists had forecast that the Australian economy would add 16.0k jobs in February, but it actually lost -6.4k.
The underemployment report is still at a historically high level for Australia
The upshot of this was that the unemployment rate jumped from 5.7 per cent to 5.9 per cent – the worst level of joblessness since January 2016.
With such a result it is unlikely that the Reserve Bank of Australia’s (RBA) neutral outlook on interest rates will change for the time being.
If this downtrend in the Australian labour market persists, the RBA may even look to cut borrowing costs this year.
Jacqui Jones of the Australian Bureau of Statistics said: "Over the past year, we have continued to see a relatively steady trend unemployment rate between 5.7 per cent and 5.8 per cent.
"The underemployment report is still at a historically high level for Australia, but has been relatively unchanged over the past two years."
A separate report showed that Australia’s consumer inflation expectations dipped from 4.1 per cent to 4.0 per cent in March.
On Thursday the pound to Australian dollar exchange rate was clinging to the day’s opening levels of AU$1.593 while the US dollar to Australian dollar exchange rate recovered almost 0.3 per cent.
Before the weekend the GBP/AUD exchange rate could react to the Bank of England (BoE) interest rate decision and the Australian Westpac consumer confidence measure.
While the pound could fall against currencies like the Australian dollar if the BoE’s interest rate outlook remains stubbornly neutral, the Australian dollar could be boosted if the confidence index improves from 99.6 to 99.7 as forecast.
