Aussie Slumps As Unemployment Rises
MarketPulse | Feb 20, 2020 05:41AM ET
h2 AUD/USD at 11-year low/h2
Australia’s unemployment rate rose to 5.3% in January, up from 5.1% the previous month, and the highest reading since October last year. The uptick can be partly explained by an increase in the participation rate to 66.1%, the highest since September, from 66.0%.
The rest of the jobs report looked encouraging, with a net 13,500 jobs added in the month, more than the 10,000 economists had expected, made up of a gain of 46,200 full-time jobs countered by a loss of 32,700 part-time ones.
Investors chose to focus on the unemployment rate, given that it is a major focus for the central bank, and pushed the Aussie lower across the board, with AUD/USD touching 0.6641, the weakest since March 2009. 3-year Australian bond yields slid 5 bps after the data.
AUD/USD Monthly Chart
In a move that had been widely expected, China reduced its Loan Prime Rate (LPR) by 10 bps to 4.05%. At the same time, it trimmed 5 bps off its 5-year LDR to bring it down to 4.75%. The move comes on the back of a 10 bps cut to the MLF earlier in the week. In addition, China had announced last weekend a raft of stimulus measures to help the economy overcome the impact of CoVid-19.
Current sentiment would suggest that the market believes this will be enough to shore up the economy when faced with the virus threat, since Wall Street indices powered higher yesterday, with some hitting new record highs.
However, the South China Morning Post, citing various analysts, cautioned that the rate cut would only provide “limited relief”.
h3 S&P sees China 2020 growth lower/h3Ratings agency S&P commented that it sees an economic recovery in China in Q3 and forecasts that the Chinese economy will expand 5% in the full year. It also cautioned that the CoVid-19 impact could double the amount of questionable loans in China.
h3 USD/SGD spikes higher/h3A firmer US dollar, weaker yuan and concerns about how deep the CoVid-19 threat will impact the local economy, since Singapore has very close links with China. In addition, it is the country with the second-highest number of confirmed virus cases outside China, along with Japan.
Get The News You Want
Meanwhile, ratings agency Fitch said the wider budget deficit announced earlier this week, rising to 2.1% of GDP in the fiscal year ending March 2021, is unlikely to jeopardise Singapore’s AAA rating, since it retains exceptionally strong external and fiscal balance sheets.
USD/SGD spiked higher to 1.4089 earlier this morning, the highest since May 2017 and is now at 1.4024. The 200-month moving average is at 1.4174.
USD/SGD Monthly Chart
Consumer confidence in Germany is expected to dip to 9.8 in March from 9.9 this month, according to the latest survey of economists, while producer prices are expected to rise 0.2% from a month earlier in January. UK retail sales for last month complete the European session, along with a speech from ECB’s De Guindos.
The US session features weekly jobless claims and the Philadelphia Fed manufacturing survey for February. That’s expected to fall to 12 from 17 last month. A speech from Fed’s Barkin concludes the session.
Original Post
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.