The Australian Dollar finished weaker at Friday New York session to 0.7610 after posting 0.7663 high, as US employment data showed better than expected figures. 255k new jobs were created, posting strong back to back jobs data as previous month was also revised higher to 292k. Wage hourly earnings increased by 0.3% was also better than expected, elevating concerns over lack of recent wage growth and inflation.
The reaction to the Australian Dollar was expected however historically would have been much more significant. The market has grown jaded over US Fed’s next rate hike as the central bank has lost credibility on its “data dependent” commitment. Strong back to back figure historically would have pushed the US dollar significantly higher but the market do not expect the US Fed to hike rate before the US election.
Nevertheless, the figures were positive across the board. This supported the US stock market and sentiment flowed to global equities. Good news of economy activity without the risk of US Fed’s rate hike (which increase risk premium) pushes US stock market into new highs. Recent easing from BOJ and BOE have also supported risk sentiment and global equities. Central banks are pushing the limits of quantitative easing. While many investors have flagged potential adverse consequences, the search for yield are tempting given negative bond return in many developed countries.
China’s Trade Balance is due today with expectation of declining exports and imports (-3.5% and 7% respectively) in USD terms. Only a big downside surprise will return the focus to China’s potential hard landing. Recent data from China have shown promise of stabilisation. The Australian Dollar has been very supportive last week as the market erased all downside pullback after RBA’s cut and poor retail sales data. Iron Ore is on a trend up and risk-on sentiment helped.
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