The Australian dollar has reversed directions on Wednesday and posted slight gains. In the North American session, AUD/USD is trading at 0.7706, up 0.24% on the day.
Australian Employment Change expected to rebound
Australia’s labor market has been steadily recovering, but a streak of job gains over a span of six straight months came to a screeching halt in April, with a reading of -30.6 thousand. The May employment report will be released on Thursday at 1:30 GMT. Employment Change is expected to show a modest gain of 30.5 thousand. The unemployment rate has also fallen steadily, and is projected to remain at 5.5%. This is a respectable figure, but RBA Governor Lowe recently stated that the RBA would not raise interest rates until unemployment falls below the 5% level.
Inflation has been rising across developed economies, as economies reopen after months of lockdown. Australia is also experiencing higher inflation, and the RBA has forecast that inflation in 2021 will rise above 3%. This is above the bank’s inflation target of 2-3%, but the bank has dampened any expectations that high inflation will translate into tighter policy. Borrowing a page from the Federal Reserve’s playbook, the RBA says that the surge in inflation is temporary and that it expects inflation to quickly fall below its target.
Will Fed remain dovish at FOMC meeting?
The Fed has not veered from its message to the markets that it has no plans to tighten policy. Still, the markets are looking for reassurance from the Fed at today’s policy meeting (18:00 GMT). Investors are feeling nervous about higher inflation in the US, as pent-up demand in travel and hospitality saw CPI jump to 5 per cent in May. If there are signs that the surge in inflation is sustained and not merely transient, then the Fed may be forced to raise rates sooner rather than later. If policymakers signal that a taper talk is on the table, then the US dollar could respond with gains.
- There are resistance lines at 0.7757 and 0.7810
- On the downside, 0.7669 is the first line of support. Below, there is support at 0.7634
Written by Admin
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