Australian Dollar Softens After Unemployment Rate Shock

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  • Surprise Unemployment Rate Uptick Dents Australian Dollar – AUD exchange rates weaken as market risk appetite sour
  • Bank of England Expresses Fresh Concerns Over Negative Impact of Brexit Uncertainty – Pound trends lower as odds of interest rate hike diminish
  • US Dollar Remains Under Pressure as Markets Weigh up Fed Rate Hike Plans – Investors jittery over impact further monetary tightening could have on US economy
  • Oil Price Slump Drives Down Canadian Dollar – Easing global oil demand weighs heavily on CAD exchange rates

Higher Unemployment Rate Weighs on Australian Dollar
AUD exchange rates weakened after November’s unemployment rate showed an unexpected uptick on the month, rising from 5.0% to 5.1%. Although this increase was partly driven by a rise in the participation rate, with more Australians now active in the job market, the mood towards the Australian Dollar still soured. As the Federal Reserve also signalled its intention to raise interest rates twice more in 2019 the appeal of the risk-sensitive AUD proved limited.
Without the support of any domestic data today the Australian Dollar may struggle to return to an uptrend.
Pound Falters as BoE Expresses Concern Over Brexit Uncertainty
Markets were unsurprised by the Bank of England’s (BoE) decision to leave interest rates on hold at its December meeting. The unanimous vote prompted little reaction from the Pound, with this lack of change already priced into GBP exchange rates ahead of the announcement. However, the appeal of the Pound still diminished in response to the BoE’s latest warning on the negative impact Brexit-based uncertainty is having on economic growth.
If November’s UK public sector net borrowing figure shows an improvement on the month, though, this could help GBP exchange rates rally this evening.
Widened Current Account Surplus Boosts Euro
A surprise widening in October’s Eurozone current account surplus offered a boost to the Euro yesterday, suggesting that the trade picture may be more positive than previously thought. Investors were encouraged by this sign of economic resilience, even though the wider picture of the Eurozone economy remains muted at best. The weaker US Dollar also gave EUR exchange rates support in the wake of the Federal Reserve’s December policy announcement.
The German GfK consumer confidence index could dent demand for the single currency, however, if sentiment shows fresh signs of souring.
Fallout From Federal Reserve Announcement Keeps US Dollar Under Pressure
After the Federal Reserve indicated that interest rates could rise twice more in 2019 the US Dollar came under significant pressure. As Fed policymakers expressed some concerns over the economic outlook investors were spooked by the thought of monetary policy continuing to tighten. This left USD exchange rates on a weaker footing throughout the day, even as market risk appetite deteriorated. An unexpected dip in the Philadelphia Fed business outlook index put additional pressure on the US Dollar, meanwhile.
However, a rebound in the latest US durable goods orders figure may give the US Dollar a boost heading into the weekend.
Canadian Dollar Softens as Trade Sales Rebound Fails to Offset Latest Oil Price Slump
Although Canadian wholesale trade sales showed a solid rebound on the month, rising 1.0% in October, this failed to shore up CAD exchange rates. Even with the domestic economy showing signs of resilience the Canadian Dollar remained under pressure thanks to the bearish mood of the oil market. As evidence emerged that demand in the major oil consuming economies is slowing this left oil prices and the Canadian Dollar in a fresh slump.
Unless October’s gross domestic product shows an uptick CAD exchange rates may remain biased to the downside tonight.
Disappointing GDP Data Dents New Zealand Dollar Demand
While November’s trade balance showed a narrowing of the deficit this was not enough to prevent the New Zealand Dollar trending lower yesterday. Investors were more concerned by the disappointing performance of the third quarter gross domestic product data. As growth eased from 3.2% to 2.6% on the year this gave investors fresh reason to doubt the outlook of the New Zealand economy, driving NZD exchange rates lower.
Any deterioration in the ANZ consumer confidence index could encourage further New Zealand Dollar selling this morning.

Data Released

December 21st 08:00 NZD - ANZ Consumer Confidence Index (MoM) (DEC)   
December 21st 18:00 GBP - GfK German Consumer Confidence Index (JAN)  10.3
December 21st 20:30 GBP - Public Sector Net Borrowing (NOV)   7 billion
December 22nd 00:30 CAD - Gross Domestic Product (YoY) (OCT)  2.2%
December 22nd 00:30 USD - Durable Goods Orders (NOV P)    1.7%

Post by TorFX

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