Later in the Asian session, we have the release of some key employment data out of Australia. This data typically provides some strong moves in the AUD and NZD.

After the RBA did it’s “dovish hold” on rates at the beginning of the month, analysts are keen to see how the data is unfolding. Employment is an important indicator for the RBA. So much so that it could help incline their actions in the next meeting. So, the currency would react in anticipation.

As we’ve discussed previously, Australia’s employment situation is sitting at what we might call a tipping point. That means changes in the unemployment rate can have complicated implications for the economy, as well as monetary policy and the currency.

What We Are Looking For

All the employment data comes out at once at 03:30 CET (that’s the day before at 21:30 EST). The market usually focuses on the employment change number.

Later in the day, there is also a speech by RBA Assistant Governor Bullock. However, the economic data is still likely to be the driver of the session.

Employment change

Expectations are for the employment change to be broadly stable. The consensus among analysts is projecting that 30K jobs were created last month. This would be more than the 25.7K recorded in March. For about a year now, fluctuations between 10K and 40K are setting a “normal” range. If we get a result beyond that, we could expect a stronger reaction in the currency.

Unemployment Rate

We can expect the unemployment rate to remain flat at 5.0%, just like last time. Since September 2018, this figure has largely been stuck moving sideways within a decimal place of 5.0%. A result of 4.8% and below would set a new record low for the cycle. A rate above 5.2% could be an indication that February was the low point and we’re to expect higher unemployment in the future.

Participation Rate

Analysts are projecting that the participation rate will remain stagnant at 65.7% once again.  This number is likely not to move the market, but the unemployment rate needs to be understood in the context of the participation rate.

Australia Is Not Immune

Australia’s unemployment is right in the middle of where most economists say that structural employment is. This would normally be a positive sign. However, in this context, Australia is repeating the pattern of most developed countries with relatively high employment, but weakening inflation and economic growth.

So far, the data released this month has shown a generally pessimistic outlook. The NAB business confidence report suggested that the economic situation would bleed over into the labor market. This has led quite a few analysts to project job adds closer to the 15K mark, though they remain in the minority.

The RBA’s Woes

The problem is that at the last meeting, the RBA let it be known that they were counting on wage increases in the near future to help support their inflation outlook.

With the central bank teetering on the edge of pulling the plug on a rate cut (like their counterparts in New Zealand) a disappointing result in the labor market tonight could seriously change the math about the future of interest rates.

Should the unemployment rate stay stable, and adds come in on the upside, it would increase hopes of another hold from the RBA. And that would be seen as supporting the AUD.