Unlike the New Zealand dollar, which is doing very well this week, the Australian dollar is reaching a four-week low due to the publication of weaker macroeconomic data and thus an increase in chances for interest rate cuts by the Reserve Bank of Australia (RBA) this year.
The AUD/USD exchange rate fell today in the morning by over 0.5 percent after weaker publication from the labor market in Australia, but also after worse than expected data from China, which seems to increase investors' fears about the condition of Australia's economically which is highly dependent on China. This, in turn, may translate into the currently observed weakness of the Australian currency.
Data released tonight (November 14) show that the unemployment rate in Australia rose to 5.3 percent in October from 5.2 percent in September this year. This publication was in line with the market consensus, but the data on the change of employment were significantly different from the consensus. The number of unemployed increased by 17.1 thousand, and employment dropped by 19 thousand, where an increase of 15 thousand was expected.
Meanwhile, in China, retail sales increased by 7.2 percent in October 2019 on an annual basis, after a 7.8 percent increase in last month. The market consensus assumed a 7.9 percent increase in retail sales. October's result means the slowest growth in retail sales since April this year. In turn, industrial production in China increased by 4.7 percent y/y in October 2019, reducing growth from 5.8 percent in September. It was also a publication below the market consensus of 5.4 percent.
Such a set of data tonight could have influenced expectations for future RBA decisions. The interest rate market increased the chances of cutting rates in December from 15 percent up to 24 percent after the publication of today's data. An event that could stop the slump in the AUD exchange rate could be the signing of the first part of the trade agreement by the United States and China. This could be an important turning point on the map of political and economic events.
AUD/USD daily chart. Conotoxia trading platform
Looking at the chart, the AUD/USD pair moves quite precisely under the long-term downward trend line, which has recently been tested and confirmed once again. Technically, only a break above the mentioned trend line could change the trend on the market for a year.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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