Australian GDP Surprise Not Enough to Offset Negative Data

For the second consecutive day, the AUD/USD fell. Australian retail sales numbers and trade data had weakened the Aussie dollar ahead of the U.S. nonfarm payrolls (NFP) report. Australian retail sales were expected to rise 0.3% but the release was flat at 0.0%, and the country’s trade data which was released at the same time posted the worst deficit in Aussie history as imports keep rising with decreasing exports. The trade gap is now $3.88 billion above the expected $2.25 billion.

Australia posted a strong 0.9% quarterly growth on June 2, but the following day the weakness of the trade and retail sales data left the AUD wide open for a downward move if the U.S. employment report came in above expectations, and that is exactly what happened. The NFP report showed that the American economy added 280,000 new jobs, crushing expectations of 222,000. The unemployment rate went up to 5.5%, but the headline number and wage inflation component boosted the USD across the board versus major pairs.

Next week, Reserve Bank of Australia (RBA) Governor Glenn Stevens will be in Melbourne to address the Economic Society of Australia. The central bank held rates untouched at 2% on June 1 which prompted the AUD to rise versus the USD ahead of the data releases that defined the fate of the AUD/USD. Stevens probably welcomed the rise in U.S. employment as a Federal Reserve benchmark interest rate hike would make his job of boosting the economy much easier with the help of a weaker AUD. The underperforming Australian indicators are a concern as the RBA has limited room to maneuver if it wants to continue its easing monetary policy.

The employment data released on June 10 could undo whatever verbal intervention Stevens manages to pull off. The expectations are for Australia to gain more than 15,000 jobs and keep the unemployment rate at 6.2%. Underperformance by such a vital component of the economy would pressure the RBA to cut rates once again, after having done so twice this year.

Australian dollar events to watch this week:

Tuesday, June 9 at 10:50 p.m. — AUD RBA Govenor Stevens speaks

Wednesday, June 10 at 9:30 p.m. — AUD employment change

*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar