AUD: Focus on the Labour Market, RBA Minutes & FOMC – NAB
Research Team at NAB, suggests that the recent RBA communications have focused on whether the Australian labour market can continue its improvement and whether early-year financial market volatility impacts on the outlook for global or Australian demand.
Key Quotes
“Both will be in focus this week, with the RBA Minutes perhaps providing more concrete detail on the global risks the Bank has become more concerned about since December, which prompted it to outline the conditions under which further monetary easing may be forthcoming.
With the ABS releasing its February data on Thursday, this week, NAB’s Chief Economist Alan Oster explores what the NAB Business Survey is telling us about the outlook for Australian employment and unemployment. The quarterly survey – which dates back to 1989 – suggests: (i) the ABS has been overstating employment growth in recent months, but prospects remain for employment growth averaging 15-20,000 per month over coming quarters; and (ii) the unemployment rate is likely to continue to drift lower over 2016 and is forecast to end the year at 5.6%. With a high unemployment cohort dropping out this month, there is downside risk to the market’s 6% unemployment rate forecast.
Last week, markets continued the trend reversals from early-year weakness that began in mid-February, with oil, the $A, equities and bond yields all rising again. While the rise in the $A is an unwelcome development for the RBA, there is some fundamental support for the move, with commodity prices having risen since the lows around the start of the year.
The other big focus for the week will be the FOMC meeting on Wednesday (result 5am Thursday 17th in Australia). While the markets are not expecting any change in US rates, our rate strategists suspect the Fed may not be as dovish as markets currently expect, with pricing continuing to reflect just over one rate hike before the end of the year and only around two thirds of a chance of a hike by June.”
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