### Summary
The Australian dollar has weakened significantly against the US dollar, euro, and British pound due to factors such as the US economy's strength, China's weak economic rebound, and a shift in the link between commodity prices and the Australian dollar.
### Facts
- The Australian dollar has reached its lowest level against the US dollar since the global financial crisis in 2009.
- The dollar has also reached its lowest level against the euro since the global financial crisis.
- The value of the Australian dollar against the pound is at its weakest since the Brexit poll.
- The US dollar's strength and expectations of a higher interest rate have contributed to the Australian dollar's weakness.
- China's weak economic rebound and deflation concerns have also affected the Australian dollar.
- The link between commodity prices and the Australian dollar has become less reliable recently.
- The trajectory of Shanghai's top 300 companies share index may indicate the future of the Australian dollar.
- A weaker Australian dollar benefits export industries and overseas visitors, while importers may face challenges.
- A tumbling dollar could support economic growth through increased exports and reduced imports.
📉 The Australian dollar is at its lowest against major currencies since the global financial crisis.
🇺🇸 The US dollar's strength and expectations of a higher interest rate contribute to the Australian dollar's weakness.
🇨🇳 China's weak economic rebound and deflation concerns affect the Australian dollar.
📉 The link between commodity prices and the Australian dollar has become less reliable.
📈 A weaker Australian dollar benefits export industries and overseas visitors.
### Summary
Economists and the Reserve Bank of Australia are determined to combat inflation, but their focus on wage increases as the cause of inflation overlooks the pricing power of large firms and the lack of competition in the market.
### Facts
- Economists argue that businesses raise prices in response to market forces, not out of greed.
- However, the rapid rise in prices is often perpetuated by workers and their unions demanding higher wages to keep up with the cost of living.
- The solution proposed is for workers to accept a small pay rise and for interest rates to be raised to put pressure on workers with mortgages.
- The Reserve Bank believes that a rise in the unemployment rate by 1 percentage point to 4.5% would help bring down inflation.
- An increase in competition between small firms is needed to make the price mechanism work as intended, but oligopolies dominate many industries in Australia.
- While other countries have recognized rising profit margins as a cause of inflation, the Australian government has dismissed this analysis.
### Opinion
- The focus on wage increases as the main cause of inflation overlooks the pricing power of large firms and the lack of competition in the market.
- Strengthening laws defending competition is necessary to fix inflation.
### Summary
The combination of a record pace of immigration and slowing demand is leading to a rise in unemployment and lower wage growth in Australia, due to the Albanese Government's immigration policy.
### Facts
- Australia's civilian population aged over 15 years grew by 598,000 in the year to July, or by 2.8%, thanks to the Albanese Government's unprecedented immigration program.
- Labor supply growth (via immigration) is now twice as fast as before the pandemic, while labor demand is slowing.
- The number of applicants per job is increasing, signaling rising unemployment.
- Australia needs to create around 35,000 jobs per month just to maintain the current unemployment rate, which is unlikely given the current policy settings.
- Rising unemployment and lower wage growth are expected due to the combination of strong labor supply growth and slowing demand.
- The Albanese Government's extreme immigration policy is criticized for undermining working-class Australians while benefiting growth lobby mates.
### Summary
NatWest expects further downside for the Australian dollar (AUD) due to weak Chinese economic activity, lack of significant policy response, and potential rate hikes by the Reserve Bank of Australia (RBA).
### Facts
- 💪 Higher long-end rates, relative US growth outperformance, sticky front-end Fed pricing, and August seasonals are all factors supporting the US dollar (USD).
- 💼 Incremental stimulus from Chinese authorities may not be enough to halt the fall of AUD, especially with a slowing global growth and lack of FX reaction to China's monetary policy easing.
- 📉 The NWM China Stress Index indicates a further slowing of economic conditions in China.
- 🏗️ Demand for construction-related activities outside of China may fade in the coming months due to higher borrowing costs and reduced steel demand outlook for the US and Europe.
- 📉 Australian employment declined in July, but it's too early to assess the strength of the labor market based on one month of weak data.
- 💰 The increase in prices raises questions about whether CPI inflation in Australia will fall back to the target range.
- 💼 The RBA has retained the optionality for further rate hikes, but weakness in data complicates future rate hikes.
- 🌍 Overall weakness in the Chinese economy will continue to weigh on AUD, but major policy response/stimulus from Chinese authorities could pose a risk to the bearish view on AUD.
- 💼 One more rate hike by the RBA may not be enough to support AUD considering the weakness in China.
Australia's record pace of immigration is outpacing labor demand, leading to a rise in unemployment and lower wage growth.
The Bank of Canada may shift its focus from the output gap to labor market indicators, such as unemployment and wages, in order to make inflation forecasts and guide its interest rate decisions, according to a report by CIBC economists. The report suggests that the labor market has become a more reliable indicator of excess demand or supply, and forecasts that if the job market outlook suggests it's not necessary, there may be no more rate hikes this year and rate cuts in early 2024.
There are growing concerns that China's economic growth is slowing, and there are doubts about whether the Chinese government will provide significant stimulus to support its trading partners, including Australia, which heavily relies on China as its top trading partner. China's economic slowdown is attributed to various factors such as trade tensions, demographic changes, a property market slump, and the lack of cash support during COVID-19 restrictions. While some experts remain optimistic that the Chinese government will implement stimulus measures, market sentiment is becoming strained, and patience is wearing thin. The impact on Australia's economy and stock market could be severe, particularly affecting mining companies, banks, construction, tourism, education, and listed fund managers.
Employment growth in the US likely cooled and wage increases moderated in August, reducing the urgency for another interest-rate hike by the Federal Reserve and tempering inflation risks.
Australia is preparing for the impact of China's economic downturn, which will lead to lower exports, reduced investment, and a decline in tourism, potentially causing a slowdown in Australia's economic growth.
The US jobs data for July suggests a cooling employment market, with a drop in labor demand and easing of hiring conditions, which could help lower inflation without a significant rise in unemployment rates.
Australia's inflation rate dropped to its lowest level in 17 months, driven by lower prices for fresh produce and automotive fuel, reducing the likelihood of the Reserve Bank raising interest rates; however, inflation in electricity prices remained high.
The U.S. jobs market shows signs of cooling as Labor Day approaches, giving investors relief from concerns about a potential Federal Reserve interest rate hike. However, global market rally and uncertainty around China's market rebound indicate that risks still persist.
The US dollar experienced a major technical reversal due to a weaker JOLTs report, leading to a drop in US interest rates, while market positioning played a role in the price action; the focus now shifts to personal consumption figures and US jobs data, with the euro and sterling firm but most other G10 currencies softer, and emerging market currencies mixed. In Asia, most large bourses advanced, but Europe's Stoxx 600 fell after rallying in previous sessions, while US index futures traded softer; European bonds are selling up, gold is consolidating, and oil prices are firm. Australia's CPI slowed more than expected, China is expected to release the August PMI, and Japan reports July retail sales. The US dollar has seen no follow-through selling against the yen, yuan, or Australian dollar, while the euro and sterling staged impressive price action. The JOLTS report saw the dollar and US rates reverse lower, and today the US reports advanced merchandise trade figures for July, with the Canadian dollar as the worst performing G10 currency yesterday.
The August jobs report is highly anticipated as investors assess the health of the labor market amidst rising interest rates and inflation, with projections indicating an increase in hiring and a steady unemployment rate, but potential disruptions from ongoing strikes and bankruptcies could affect the data. The report is closely watched by the Federal Reserve for signs of labor market softening as they grapple with inflation, and while the labor market has remained tight, there are indications of a gradual slowdown. Job openings have decreased, along with resignations, pointing to a labor market that is cooling.
The US job market shows signs of slowing but remains resilient, with 187,000 jobs added in August and a rise in the unemployment rate to 3.8%, as more people actively look for work. Wage gains are easing, signaling a potential slowdown in inflation, and the Federal Reserve may decide against further interest rate hikes.
The US added more jobs than expected in August, but the unemployment rate rose, causing little change in the price of bitcoin while traditional markets reacted positively.
The US added more jobs than expected in August, but the unemployment rate increased, indicating a looser job market and potentially relieving concerns about a hot labor market contributing to inflation.
The Australian dollar declined against the US dollar as the Australian economy slowed in Q2, indicating that the Reserve Bank of Australia may not raise interest rates further.
Australia's economy grew more than expected in the second quarter, driven by exports and investment, while household consumption remained weak due to high interest rates; however, productivity and rising labor costs remain concerns for the Reserve Bank of Australia.
Australia's economy is experiencing a per capita recession, with a drop in GDP per capita for the second consecutive quarter, driven by weak household spending and reliance on government spending and population growth.
Australia's economy may not experience a soft landing, according to Treasurer Jim Chalmers, due to potential risks such as China's slowing economy and a slump in household consumption resulting from rising interest rates.
Australian CEO Tim Gurner suggests that unemployment needs to rise drastically in Australia because workers are too arrogant, stating that employees need to be reminded that they work for the employer, not the other way around.
Immigration is not to blame for Australia's housing crisis; rather, it has contributed to economic growth and filled critical gaps in the job market.
The Australian government's reliance on the non-accelerating-inflation rate of unemployment (NAIRU) as a measure of full employment is outdated and flawed, as recent data shows that low unemployment has not led to significant wage growth or inflation, indicating that the NAIRU is no longer a reliable indicator for economic policy.
The impact of a potential economic downturn in China will be felt in Australia through weakened trade and reduced risk appetite in financial markets, according to Australian regulators.
Australia's inflation for August met expectations, with core inflation easing further, reducing pressure on the central bank to raise interest rates next month.
Gold and silver prices are weaker due to chart-based selling and bearish outside market elements, including a strong U.S. dollar index and high U.S. Treasury yields, while risk appetite is low due to concerns about a possible U.S. government shutdown; however, China's upbeat economic news suggests potential stabilization, and Australia's consumer price inflation has increased.
The Australian share market and broader economy are facing multiple threats, including rising interest rates, cracks in China's property sector, diminishing demand for construction materials, rising oil prices, and global fallout from the US political divide over debt levels, which could potentially result in substantial damage. There are concerns over a potential recession in the US, Australia, and the UK, with investors on edge due to recent volatility in equity markets and the inversion of the yield curve. Uncertainty and mixed signals in the market are leaving investors unsure about the future direction.
The Australian dollar is experiencing heavy selling pressure and could potentially fall further against the US dollar as global interest rates rise, with economists warning that a significant drop in the Australian dollar could lead to higher inflation.
The United States is expected to add 170,000 jobs in September, which would mark the fourth consecutive month with an increase below 200,000, potentially exacerbating the labor shortage and making it difficult for the Fed to control inflation. The unemployment rate is forecast to fall slightly to 3.7%, while wage growth is expected to rise 0.3%. The impact of labor-union strikes, such as the expanded strike by auto workers, could also affect employment growth.
The Australian dollar is attempting to recover against the US dollar due to softening US jobs data, but traders remain cautious ahead of tomorrow's NFP report which could increase volatility; technical analysis shows a potential for further upside.
