Employment change weakest in five years

The Australian economy lost 19,000 jobs in October, 10,300 in the full-time category and 8,700 part-time ones. That was the most number of jobs lost since September 2014. Analysts’ expectations had been for a 15,000 jobs gain. The unemployment rate rose to 5.3% from 5.2% in September, as expected, though the participation rate did dip to 66.0% from 66.1%.

Since the RBA has kept the jobs market as a major focus for its monetary policy going forward, the knee-jerk reaction in money markets was to price in a higher probability for an earlier rate cut. Chances of a December rate cut rose to 25% from 14% yesterday and the chances of a cut by March next year jumped to near 60% from 45% yesterday.

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The increased prospect of lower rates pressured the Australian dollar across the board, with AUD/USD dropping 0.61% to 0.6796, moving below the 55-day moving average at 0.6813 for the first time since October 17. Losses against the yen were deeper, dropping 0.71% to 73.87 and heading toward the convergence of the 100- and 55-day moving averages at 73.71 and 73.60, respectively.

AUD/JPY Daily Chart

China data disappoints

The latest set of Chinese data for October was a disappointment. Retail sales rose 7.2% y/y matching the weakest growth in six months and well below forecasts of a 7.9% gain. A similar picture unfolded for industrial production, which increased just 4.7% y/y and a reversal of September’s jump to +5.4%. Even fixed asset investment couldn’t help sentiment with year-to-date growth of 5.2%, below estimates of a 5.4% increase.

All-in, it was a gloomy set of data which US President Trump will no doubt jump on when trying to force China to sign the Phase 1 deal. The already-weak Australian dollar edged further lower but USD/CNH looks poised to fall for the first time in five days. The pair is now at 7.0231 and has stalled ahead of the 100-day moving average at 7.0369.

USD/CNH Daily Chart

Japan registers Q3 growth – just

The Japanese economy grew 0.1% on a quarter-by=quarter basis in the third quarter, data released early this morning showed. That was the weakest rate of expansion in seven quarters and risks dipping into negative territory in Q4.

There were too many other inputs affecting the Japanese yen so there was no significant weakening in the currency. The reaction was more evident in the equity market, with the Japan225 index falling 0.27% to 23,312.

More growth data

GDP growth numbers for both Germany and the Euro-zone for Q3 are due today, with both expected to show the same growth rate as the previous quarter, -0.1% q/q for Germany and +0.2% for the Euro-zone. UK retail sales are seen rising 0.2% y/y in October after a flat reading in September.

The second day of the Fed Chairman’s testimony on Capitol Hill does not normally differ much from day one, but the Q&A session might throw up some interesting news bytes. Powell’s testimony is accompanied by speeches from FOMC colleagues Evans, Clarida, Bullard, Daly, Williams and Kaplan. The mantra will likely be the usual “on hold, subject to data” one.

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