Solid jobs report doesn’t impress Aussie traders

Summary:

• Australian jobs market thrived another month in a row
• Japanese manufacturing PMI slightly improved in March
• PBoC is reportedly unlikely to deliver RRR cuts in the short-term

Aussie remains unfazed

The Australian dollar is trading little changed following another excellent employment report. Although the data showed decent numbers, the tight labour market has yet to translate into higher wage growth and thereby higher domestic price pressure. This is the reason why Aussie traders tend to take these kind of releases with a grain of salt. Moreover, let us also recall that the Reserve Bank of Australia has recently switched into a dovish mode suggesting that rate cuts could be implemented this year, that is undoubtedly not a factor acting in favour of the Aussie dollar. What today’s release presented?

The Australian labour market thrived in March, the Aussie remained little changed though. Source: Macrobond, XTB Research

First of all, the overall level of employment grew in March by 25.7k and easily beat expectations suggesting a 15k. Furthermore, full-time employment increased as much as 48.3k while part-time employment decreased 22.6k. The data was consistent with a pattern seen in recent months as evidenced by the chart above. It signals a qualitative improvement in the Australian labour market, however, it has not spurred higher wage growth as of yet. The unemployment rate increased to 5% from 4.9% and was in line with expectations. Nevertheless, an uptick in unemployment was fully offset by a rise in the labour force participation rate, which ticked up to 65.7% from 65.6%. As we noted at the beginning of this analysis, the data had a marginal impact on the bond and currency markets, hence the market-based probability for a rate cut by the year-end in Australia barely changed and it stands subtly below 75% this morning. As far as the Australian economy is concerned, it is also worth noting that Fitch confirmed its AAA rating for the country with a stable outlook. However, the rating agency underlined that momentum in the economy decelerated in the near-term, though it remained still quite robust compared with AAA peers. The agency also noted that it expected the ongoing housing market correction in Australia, but it should remain orderly.

Technically the AUDUSD has just approached the important resistance at around 0.7190. If bulls fail to move ahead, it could signal a possibility to see lower levels. The key supports could be found at 0.7140 and then 0.7060, 0.7020. Source: xStation5

Stock markets head lower

Maundy Thursday has not been successful for Asian equity markets. The Japanese NIKKEI (JAP225) is falling 0.8%, the Shanghai Composite is falling 0.4% while the Hang Seng (CHNComp) is going down 0.8%. Although some of these falls may stem from a desire to book profits (the recent days have brought decent increases), the news we got overnight could have also contributed negatively. Namely, according to the China Securities Journal the PBoC is unlikely to cut a reserve requirement rate in the short-term. An article went on and stressed that better-than-expected Q1 economic data lessened pressure on the China's central bank to deliver more liquidity. On the other hand, we got some improvements in terms of PMIs. The manufacturing index for Japan jumped to 49.5 in April from 49.2. In Australia, CBA/PMI for manufacturing decreased to 51 from 52, for services rose to 50.5 from 49.3 and the composite gauge improved to 50.6 from 49.5. Keep in mind that European PMIs will be pivotal in this regard as they may shed more light on the current economic slowdown.

In the other news:

• Japan’s press suggests that a sales tax hike in October may be delayed

• Senior US and Chinese officials are scheduling more face-to-face trade talks in an effort to reach a deal by early-May, Bloomberg reports