Data can’t stop $A capitulation

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The Australian dollar declined sharply last week despite a wave of strong economic data. Surprisingly, the downward momentum in the currency was sustained in the face of extraordinarily strong Australian employment figures.

"The downward momentum in the currency was sustained in the face of extraordinarily strong Australian employment figures."
ANZ Research

The ABS reported a monster 121,000 rise in jobs in August, the largest monthly increase since the series began in 1978, a result which saw the unemployment rate shrink from July’s reading of 6.4 per cent to just 6.1 per centin August.

ANZ finds it hard to believe that actual employment rose this strongly in the month, and expects that the large measured gain reflects elements of both statistical noise and some genuine ‘catch up’ following earlier weakness in employment.

Other labour market indicators, like ANZ job ads and business survey measures, continue to signal to an improvement in employment and unemployment.

As for the Australian dollar, some of the weakness likely reflected strength in its US counterpart. Ongoing falls in the iron ore price and the recent run of soft Chinese data also likely contributed.