AUD/USD: ING sees upside supported by employment risks and RBA trajectory
Australian Employment Data Faces Headwinds, But RBA Rate Hike Still Expected
Francesco Pesole of ING anticipates that Australia's March employment report may disappoint, with a potential increase in the jobless rate. Despite these concerns, he believes the Reserve Bank of Australia is likely to proceed with a rate hike in May. Policymakers remain focused on inflation expectations and further monetary tightening, which, according to Pesole, means the AUD/USD pair could continue to strengthen. A peace agreement that boosts exports and market confidence could further challenge ING’s 0.720 quarterly forecast for the currency pair.
Labour Market Weakness Unlikely to Deter RBA
Pesole notes that there are risks of weaker-than-expected job numbers for March, with consensus forecasts of a 20,000 increase in payrolls appearing somewhat optimistic. He points out that, over the past year, positive employment streaks have often been followed by disappointing results.
He suggests the unemployment rate could tick up from 4.3% to 4.4% if job growth slows and participation remains steady. While this would not yet reflect the impact of recent geopolitical tensions, it might indicate a slight loss of momentum in the labour market as the conflict period begins.
Despite these potential setbacks, Pesole does not believe the data will be enough to dissuade the RBA from raising rates in May. He senses a sense of urgency among policymakers, maintaining that a May hike remains the most likely scenario, rather than a delay until August.
Positive Outlook for AUD/USD
Looking ahead, Pesole argues that the Australian dollar still has room to appreciate, even when accounting for the possibility of renewed geopolitical risks. He adds that a peace settlement would not necessarily bring energy prices back to pre-war levels, which could allow the AUD to benefit from both higher export prices and improved investor sentiment.
(This report was produced with the assistance of artificial intelligence and subsequently reviewed by an editor.)
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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