The Australian dollar became the worst-performing major currency in trading on Thursday (18/May). That was due to global risk sentiment and deteriorating domestic economic data, as well as the appreciation of the US dollar.
This AUD/USD slumped more than 0.7 percent since the open this morning to touch a low of 0.6605 at the start of the New York session.
The Australian Bureau of Statistics (ABS) reports the Australia's unemployment rate is rising rapidly from 3.5% to 3.7% in April 2023, despite the previous consensus expecting no change.
The number of jobs in the period also decreased by 4.3k, whereas the consensus expects job creation of 25.0k. Market participants took the increase in Australia's unemployment rate as a signal further.
Australian Dollar Rate Drops
They are sure That the central bank will not raise interest rates again for the rest of the year. It was especially after announcing an unexpected "rate hike" earlier this month.
The speculation triggered the fall of the Australian dollar rate in the forex market. However, economists caution that this single package of data does not guarantee any policy from the side of the Reserve Bank of Australia (RBA)
Some economists argue Australia's labour market conditions are still too tight. That is why; they have not reached the ideal situation that the RBA hopes to sustainably suppress inflation.
Others suggested monitoring other important economic data releases from Australia. The aim is to guess the central bank's next policy move.
Further Employment Data is Needed
The Australian economic team notes that retail trade (May 26) and April (May 31) monthly CPI indicators will be important to monitor ahead of the RBA meeting on June 6.
Carol Kong As a currency strategist from Commonwealth Bank of Australia stated that. Warren Hogan, an Australian macroeconomist, said the data showed "the first signs" of easing in the labour market.
However, he also stressed the need for employment data from the next few months to ensure that the projected reduction in inflationary pressures expected by the RBA is actually realized.
Elsewhere, The GBP/USD duo fell sharply in trading on Thursday (18/May). It was following the dovish statement of the Governor of the Bank of England (BoE) yesterday.
Pound Reached It’s Lowest Level
The pound fell about 0.6 percent to its lowest level since April 26 at 1.2397 against the U.S. dollar. BoE Governor, Andrew Bailey, told the British Chamber of Commerce Annual Conference about the impact of rate hikes announced so far.
It could be seen that this thing had not fully expanded in the economy. However, inflation will decline sharply until it is close to the 2 percent target by the end of this year.
The situation looks brighter than it was a few months ago, as Bailey said. In the latest Monetary Policy Report (MPR), published last week, they now forecast moderate but positive (economic) growth.
Besides that, they also hoped for a much smaller rise in unemployment. However, we also have good reason to expect inflation to fall sharply in the months ahead, starting with April data due on May 24.
BOE may Not Raise the Rate Again
Market participants interpreted Bailey's remarks as a signal that the rate hike cycle is over. Besides that, the BoE is not raising rates again in the months ahead.
GBP/USD in the short term is pressured by such speculation as well as the appreciation of the US dollar, although the outlook is better in the longer term. Analysts from ABN AMRO expect the BoE will not raise interest rates again.
However, it may remain more hawkish than the Fed. Therefore, they predict GBP/USD to reach 1.24 by the end of September, another 1.24 by the end of this year. Then it may rise to 1.25 by the end of the first quarter of 2024. Another increase is 1.26 by the end of the second quarter of 2024.
