Aussie Dumps Then Jumps

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Market Drivers for August 8, 2013
Australian employment misses
BOJ keeps policy same
Nikkei -1.59% Europe -0.20%
Oil $104/bbl
Gold $1291/oz.

Europe and Asia:
AUD Employment Change -10.2K vs. 6.2K
AUD Unemployment Rate 5.7% vs. 5.8%
AUD Full Time Employment Change -6.7K vs. -4.4K
JPY Bank Lending
JPY Buying Foreign Bonds 698bn vs. 233bn
JPY Buying Foreign Stocks -19.5bn vs. 154bn
CNY Trade Balance 17.8bn vs. 26.2bn
CHF Unemployment Rate 3.2% vs. 3.2%
EUR German Trade Balance 15.7bn vs. 15.2bn
EUR ECB Publishes Monthly Report

North America:
USD Initial Jobless Claims 8:30
CAD New House Price Index 8:30

Australian dollar dipped on weaker than expected employment data, but then quickly recovered and hit fresh weekly highs after the release of Chinese Trade data that showed a significant pick up import demand. At the start of Asian session trade, the Australian dollar was once again battered after the unemployment data for July showed that the country lost -10.K jobs in the month versus an expected 6.0K gain.

The labor data was disappointing on all fronts as full time employment contracted by -6.7K versus -4.4K eyed and part time employment declined as well by -3.5K versus a prior gain of 14.8K. The unemployment rate dipped slightly to 5.7% from 5.8% but that was only because the participation rate dipped as well to 65.1 versus 65.3.

Overall, this was just another in a series of depressing data points from Down Under that clearly showed conditions on the ground continue to deteriorate. If the employment situation in Asutralia does not improve, the prospect of yet another rate cut by the RBA will increase markedly and the Aussie is likely to feel further downside pressure.

However tonight, the unit quickly shrugged off the dour labor news and rose through the 9050 level after Chinese Trade data surprised the market. China reported a much smaller than expected surplus of 17.82bn versus 26.90bn eyed, but investors were buoyed by the surprisingly robust jump in imports which increased by 10.9% versus an expected gain of only 1%.

As Chinese economy begins its long transition from production led growth to consumption led growth the import numbers take on a much greater importance and today’s data raised hopes that demand in China may not be as fragile as initially thought. Of course many analysts remain sceptical of Chinese data but tomorrow’s torrent of releases could confirm today’s report and provide further support for the Aussie.

Elsewhere the action was very quiet with no major releases out of Europe. German Trade balance beat to the upside slightly by printing at 15.7bn vs. 15.2 projected, but despite clear evidence of pick up in economic activity in the Eurozone the ECB reduced its estimates for growth in 2013 and 2014 to -0.6% from -0.4% and 0.9% from 1.0%. The euro however, ignored the downgrade as investors are becoming convinced of the rebound in the region and the pair climbed through the 1.3350 level as it gears up to challenge the key 1.3415 swing high from several months back.

In North America the calendar remains barren with only the jobless claims on the docket and the price action is likely to be subdued as we are deep into the dog days of summer with many global investors on the beach rather than at their desks.

Boris Schlossberg
Managing Director

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