Australian Dollar Takes a Hit: GBP/AUD at 1:2 for First Time Since 2009

The Aussie dollar has taken a fresh hit following the release of labour market data that came in far worse-than-expected.

Australian economy lost a total of 12 200 jobs in January; the loss of 28’100 full-time jobs have been only partially countered by 15’900 increase in part-time jobs and the unemployment rate deteriorated from 6.1% to 6.4% (vs. 6.2% exp.)

This is a new cyclical peak for the unemployment rate and the highest level since June 2002.

The pound to Australian dollar exchange rate (GBP/AUD) rose to its highest level since 2009 following the news having momentarily breached the 1 GBP to 2 AUD level.

GBP to AUD exchange rate

The euro to Australian dollar (EUR/AUD) meanwhile traded higher at 1.4717 putting aside the near-term advantage the Aussie had enjoyed in the run-up to the data.

“Put AUD buyers at the top of your call list this morning. Australia’s buck tumbled toward last week’s six-year bottom after a poor local jobs report further opened the door to a rate cut,“ says Joe Manimbo at Western Union.

The market now is pricing in a greater chance of another RBA rate cut and all eyes will certainly be focused on the next RBA meeting on the 3rd of March.

We would expect further Aussie weakness ahead of the event.

“Today’s figures are in line with the RBA’s revised forecasts for the unemployment rate to rise further and to stay elevated for an extended period. We expect a further rate cut in H1 2015, most likely at the next board meeting in March,” says Riki Polygenis at ANZ Bank in Sydney.

The most recent jobs data contrasts notably to the ANZ report which confirmed the outlook for this element of the economy remains firm.

Markets Boosted by Peace Deal

Turning to financial markets at the present time we hear from analyst Connor Campbell at Spreadex:

Waves of relief seemed to roll over the markets as the Ukraine/Russia ceasefire agreement removed one more cloud of uncertainty.

This was nowhere as true as in the Eurozone with the DAX currently displaying the potential to close at a new all-time high.

With positivity in the air the markets didn’t dwell of the unresolved issues surrounding Greece and instead focused on its eastern-European success. If this is how well the Eurozone markets react to a tentative ceasefire, who knows how high they could go if the Greek crisis is resolved with a minimal loss of vital organs.

The news that the European Central Bank is once more lending a hand to Greek banks by increasing the liquidity available to the institutions saw the euro grow its gains against the dollar after an already strong performance by the Eurozone currency this Thursday afternoon.

This caused the gains gold had begun to make to stall at around $1220 per ounce, a dismal figure for a commodity that was near $1300 a few weeks ago.