AUD/USD under pressure after weak economic data

01/19/2023

1 minute read

2023.01.19 05:55

On Thursday, the Australian dollar continued to fall. is down 0.82 percent in Europe, trading at 0.6884.

The Australian dollar fell significantly as a result of the weaker-than-anticipated employment report for December in Australia. Investors may have been disappointed by the total employment loss of 14,600 as shown by. The release wasn’t too bad; full-time jobs increased by 17,600, while part-time jobs decreased by 32,200. The remained at 3.5 percent, which was slightly higher than the predicted 3.4 percent.

Recent data on inflation suggest that it will continue to rise. The Melbourne Institute increased from 5.2% to 5.6%, and November increased to 7.3% from 6.9%. The all-important reading of quarterly inflation will be examined next week.

The Reserve Bank of Australia would be forced to consider raising rates higher and for a longer period of time than it had anticipated if inflation accelerated in Q4. The RBA is expected to raise the cash rate to 3.50 percent or slightly higher early in the year, so we could see additional rate increases. The cash rate is currently at 3.10 percent.

Every time there is a weak US release, the seems to fall, and this week has had some weak data. The headline and both declined by -1.1%, while the fell to -32.9. The PPI score was -0.5%. As the impact of higher interest rates is being felt across the US economy, all three releases were weaker than the readings in November and missed forecasts.

After a 25-bp increase in February, the markets are clinging to the belief that softer numbers will force the Fed to slow down its rate hike pace and possibly end the current rate cycle. The Federal Reserve has done everything in its power to dispel rumors that it will change course, but I believe the US dollar will lose ground if key releases are weaker than anticipated.

AUD/USD Daily Chart