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Aussie Shines as Employment Booms

Last updated 1/14/2010 5:27 AM ET (GMT -5) 0 Comments - Add your comment

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Boris Schlossberg

Director of Currency Research, GFT

Top Stories

• Australian employmemt beats handily prompting speculation of another RBA rate hike
• ECB rate annoucement on tap
• Nikkei rebounds +1.6% and Europe also stronger on the open ahead of Intel earnings
• OIl remains at $80/bbl
• Gold firmer at $1140/oz.

Overnight Eco

• AUD Employment Change 35.2K vs. 10.2K eyed
• AUD Unemployment Rate 5.5% vs. 5.8%
• JPY Core Machinery Orders -11.3% vs. 0.3% forecast
• JPY CGPI -3.9% vs. -3.8%
• NZD Building Consents 1.2%
• EUR German Final CPI 0.8% vs. 0.7%
• EUR IP 1.0% vs. 0.6%
• ECB rate annoucement 1.00% forecast

Event Risk on Tap

• USD Retail Sales expected at 0.4%
• USD Unemployment Claims expected at 437K
• USD Import Prices expected at -0.1%
• USD Business Inventories expected at 0.0%

Price Action

• USD/JPY trades back to 92.00 as risk flows improve in anticipation of US earnigns
• AUD/USD takes out 93.00 on very strong labor data and rate hike expectations
• GBP/USD pivots around 1.6300 in slow trade
• EUR/USD quiet at 1.4500 ahead of the ECB

Another data free session in Europe today, but risk FX performed better on the back of strong labor data out of Australia and a rebound in Asian equities ahead of Intel earnings at the end of US trading session. In Australia the employment data once  again surprised to the upside printing at 35.2K versus 10K forecast as the unemployment rate dropped to 5.5% from 5.8% the month prior.

This was the fourth straight month of positive job growth for Australia with hiring boom being driven by commodity and energy development projects in the region. At present, Australia is clearly the best performing  economy in the G-20 universe  as it continues to benefit from higher commodity prices and strong demand from China. The  Aussie remains the poster child for the recovery trade with the pair taking out the .9300 level in early European dealing on assumption of further rate hikes by the RBA. If global growth approaches the 3.5% level this year  as many analysts believe, the Aussie stands a good chance of reaching parity with the dollar as interest rate differentials will continue to attract capital into the currency throughout 2010.

Meanwhile USD/PY also saw a strong move higher with pair recapturing  the 92.00 handle by mid morning European trade as risk flows improved with the Nikkei rising more than 1.5% ahead of the anticipated rise in earning from Intel. The chip manufacturer is scheduled to report after the close today and is the first marquee name to provide market guidance for the new year.

Before Intel however, traders will get a glimpse of the US Retail numbers due at 13:30 GMT and although the consensus view is calling for a sharp drop in growth to 0.3% from 1.2% the month prior, chances are good that the number could surprise to the upside given the improvement in data from the weekly surveys. Although most of the recent Fed  rhetoric has reiterated the notion that US rates will remain stationary for the foreseeable future, USD/JPY could continue to rise as bond markets begin to anticipate the recovery well ahead of the US monetary policymakers, steepening out the yield curve..

Finally today also brings the monthly ECB press conference and the euro remains a bit heavy ahead of the event as traders are concerned that ECB chief Jean Claude Trichet may assume a more dovish posture given the latest economic data from Germany which shows a loss of momentum in  Q4. Mr. Trichet will also face questions on Greece, but will likely sidestep the issue on political grounds.  In general however, if Mr. Trichet sounds at all cautious about the prospects of EZ growth or worse lowers his forecasts for 2010, the euro could come under further pressure as the day progresses and could possibly tumble to 1.4400 if markets become convinced that Eurozone will be the laggard in 2010..

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.