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Australian Unemployment Hits a 4 Year High

Last updated 3/12/2009 3:52 AM ET (GMT -5) 0 Comments - Add your comment

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Boris Schlossberg

Director of Currency Research, GFT

Australian unemployment hit a four year high reaching 5.2% versus estimates of 5% but surprisingly the country’s economy continued to generate jobs adding 1800 new workers versus forecasts of -20,000 loss. The labor participation rate also improved rising to 65.5% from 65.3%.

Although clearly affected by the global slowdown in demand, Australian economy continues to outperform most of its G10 peers and as it maintains a modicum of growth while other major industrialized economies have already slipped into severe recessions. Nevertheless, the markets are worried that it is only a matter of time before Australian growth turns negative as well.

One key factor that is weighing on the Aussie right now is the prospect of further slowdown in China. Up to now, Australia has been able to avoid a recession in large part due to the fact that it remains the primary supplier of commodities to China. However, yesterday's Chinese trade data, which showed a massive contraction in demand for both exports and imports, augurs very poorly for future Australian growth. Indeed if China is forced to curtail its purchases of raw materials as the year progresses, Australian economy will suffer greatly and the unemployment figures could begin to skyrocket.

Little wonder then, that despite a better than forecast print the AUD/USD failed to rally on the news. After an initial knee jerk reaction higher  the pair drifted lower for the rest of the night unable to hold the 6500 handle. The Aussie was especially weak against the kiwi with the cross   dropping more than 300 points off yesterday’s highs after the RBNZ rate cut and relatively hawkish statement by Bollard .  Overall the AUD/USD continues to be contained in a broad 6500-6000 range as markets grapple for visibility on global growth in 2009.  

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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.