Jobs Were Strong

Wages Remain Soft as AUD and NZD Slide

Posted Wednesday, February 19, 2020 by
Rowan Crosby • 2 min read

Wage growth in Australia appears to still be a worry and that is one reason the RBA continues to leave the door open on further rate cuts.

Today the wage growth index was released, indicating that wages are on track to grow at 2.2% this year. This was in line with expectations and in fact, is slightly ahead of CPI, but not by much.

The Dec 2019 CI reading showed growth of 1.8% YoY.

So what does that mean?

The RBA is concerned that consumer spending is being held back by low wages and soft employment. Both go hand in hand. If there is no upward pressure on wages, inflation will remain soft and that has been an ongoing concern for the RBA. In reality, that’s why we are now seeing interest rates at 0.75%.

While the data is starting to improve, led by employment, wages are still a bit of a headache for the RBA.

But as it happens, we are all waiting for tomorrows employment report where Governor Lowe and his men would ideally like to see that jobless rate fall back under 5.0%. Not may are expecting that to happen, given the time of year – January is usually slow due to the holidays.

But we would like to see some progress in the months ahead. There will also likely be some impact from the Chinese travel bans on the back of the coronavirus. Which is impacting a number of key sectors.


Technical Levels

Both the AUD/USD and NZD/USD were soft yesterday as fears were growing around what the coronavirus will do to the economy. Apple reported that it would be taking a hit thanks to the impact on China and that added to a bit of a risk-off feel.

The AUD/USD is sitting on key support and a soft jobs report could finally see a breakdown of that big support which is just under the 0.6700 level. 0.6680 is probably the bottom here.

The Kiwi is looking very similar on the charts and is holding under the 0.6400 for now.

Both appear very bearish on a chart level and I would not be surprised to see some more downside here.

AUD/USD – 240min.


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