Aus Dollar Pressured by GBP Despite Strong ANZ Job Data Report

ANZ jobs and currency rates

The Australian dollar exchange rate complex (AUD) has traded softer at the start of the mid-January currency market session and forecasts are warning of more losses.

The latest declines in AUD come despite a continued improvement in the employment picture in the country.

A look at the markets at the time of writing shows:

  • The British pound to Australian dollar exchange rate (GBP/AUD) is trading at 1.8702.
  • The euro to Australian dollar rate (EUR/AUD) is at 1.4518.
  • The Australian to US dollar exchange rate (AUD/USD) is at 0.8127.

Seventh Consecutive Rise in ANZ Job Advertisements

Job advertisements rose a further 1.8% m/m in December to record their seventh consecutive monthly rise (in seasonally adjusted terms). Job ads have now trended higher for 14 months and are up 11.4% over the year to December say ANZ Bank who compile the report.

The improvement in December was driven by both internet and newspaper job ads. Internet job ads rose 1.8% m/m to be up 12.3% y/y. Newspaper job ads increased by 3.0% m/m following declines in the previous three months and in 8 of the 12 months of 2014.

Newspaper job ads were particularly strong in NSW and Victoria in the month, and very weak in WA and SA. In trend terms, newspaper job ads are trending up in NSW, SA and the ACT. Job ads are trending down in the other states and territories, with a weakening in WA in the past two months of note.  

Commenting on the outcome, ANZ Chief Economist Warren Hogan says that while the readings continue to improve, there are some negatives to be considered:

“The bad news is that this has not been quite enough to counteract the flow of new workers into the economy plus the on-going loss of jobs in certain sectors.”

“As a result labour market conditions can be described as soft which will continue to cap wage increases. Together with the recent decline in oil prices, this will feed through to relatively subdued inflation outcomes through 2015.

Impact on the Aussie Dollar and Central Bank Policy

How does the jobs data tie up with interest rate policty and the value of the Austrlian currency?

Hogan says:

"The most likely course remains for the RBA to keep rates in a holding pattern for most of 2015. However a softer inflation outlook suggests the RBA could have a little more wriggle room than previously anticipated to support business and consumer confidence.

"The global disinflation theme and decline in global long-term yields also raises the risk that an RBA cash rate at 2.5% attracts capital flows, which in turn could prevent a further desired depreciation of the AUD.”

“We will be watching consumer confidence in the next few days as well as the official employment numbers on Thursday to ascertain the likelihood that the RBA Board will decide at some stage in the next few months that the economy can afford further interest rate reductions to help grow the non-mining economy a little stronger than it is at present.

"Right now we think the best course of action is for the RBA to maintain a steady hand on interest rates. But with global energy costs falling substantially, and inflation likely to be lower than previously thought, there is increasing scope for Australian interest rates to fall a little over the first half of 2015.”

Retail Sales Figures Disappoint

The job data follows on from January retail sales figures which showed growth was a touch weaker than expected in November, rising 0.1% m/m (ANZ & mkt: +0.2%).

Both the headline and detail were soft. Electronics were down only modestly (-0.9% m/m) but the bulk of the sharp rise in electronic sales (which include iPhone 6) in September is yet to be unwound. Ex-electronics, sales rose 0.2% m/m, after a 0.3% m/m rise in October.

Cafes, restaurants, and takeaway food services rose 0.8% m/m, which only partly unwinds the fall in the previous month. Surprisingly, clothing sales were weak while department stores sales were flat after strong gains in the previous two months. ‘Other retailing’ was also weak.

These data confirm that momentum in retail sales was relatively modest in Q4. Anecdotes for December spending were mixed, but we expect lower oil prices would have helped sales in the month.