Australia ANZ Job Advertisements Eases in August

Australia ANZ Job Advertisements Eases in August
September 8, 2020

 

The euro dollar declined against the Australian dollar yesterday on reports of a slowdown in the pace of German industrial production in July, compared with the earlier month. A slight improvement in the Eurozone investor confidence (Sentix Investor Confidence Index) was unable to stop the euro dollar’s decline. But for the weak ANZ job advertisements data from Australia, the euro dollar’s decline would have been much steeper. In the past 24 hours, the EUR/AUD pair declined from a high of 1.6275 to a low of 1.6225.

The AIG Services Index declined to 42.50 in August, from 44 in the earlier month. The index reading reflects the relative level of business environment among service-oriented companies. A reading below 50 indicates contraction and vice-versa. Employment fell 7.9 points to 39.40, but sales inched down by only 0.1 points to 43.30. Fresh orders also declined 1.7 points to 45.20. Average wages decreased 2.4 points to 43.40. All sectors reported contraction.

Regarding the decline, AIG said, “the introduction of stage 4 restrictions in the greater Melbourne area following some optimism in July weighed heavily on business activity in Victoria and the impact was felt across other states. All indicators were firmly negative for August and employment decreased significantly from the previous month.”

Moving to job data, Australia and New Zealand Banking Group (ANZ) reported that job-related advertisements grew 1.6% in August, compared with 19.1% in the earlier month. Lockdown measures, reintroduced in Victoria State to contain COVID-19 infections, led to a slowdown in the growth of job advertisements.

Notably, job advertisements rebounded 42% in June, following a historical decline of 53.7% in April, mainly due to the impact of the lockdown.

The RBA closely watches the ANZ job advertisements data as it provides precise count on job advertisements, while the Australian Bureau of Statistics data only indicates plans of companies to hire. It can be remembered that the RBA has trimmed benchmark interest rates to a record low level of 0.25% and confirmed its preparedness to bring down the rates further, if necessary.

The country’s central bank (Reserve Bank of Australia or RBA) is expected to increase its bond purchases or slash rates to assist in rejuvenating the economy, which has entered into recession for the first time in three decades. Seven out of 11 economists, as per Bloomberg’s report, believe that the RBA will boost quantitative easing by increasing the bond purchasing program. In fact, George Tharenou, an economist at UBS AG, has opined that it could begin by next month. Other economists believe that it could start at the end of this year or in early 2021. Nevertheless, the proposal to trim the benchmark rate and also a 3-year yield target rate to 0.10% was not that popular.

Interestingly, the RBA is not comfortable with the 27% appreciations recorded by the Australian dollar from the nadir in March and would like to prevent further appreciation to avoid detrimental effects on the economy.

ANZ Senior Economist Catherine Birch anticipates deep declines in the country’s employment in August and September. She opined that the country might have to spend billions of dollars to support jobs and bring the economy back on a growth track.

In Europe, German statistical organization Destatis stated that the country’s industrial production grew 1.2% m-o-m in July, following a 9.3% (upwardly revised from the initial estimate of 8.9%) increase in the earlier month. Economists had anticipated industrial production to expand by 4.5%.

On a y-o-y basis, industrial production contracted by 10% in July. In June, industrial production had declined 11.4% on a y-o-y basis.

Excluding energy and construction, production in the industry grew by 2.8%. The production of consumer goods rose by 1.8%, while the production of capital goods increased 2.1%. Production in the automotive sector in July increased 6.9% m-o-m. Nevertheless, it is still about 15% below the pre-pandemic February level.

In the meanwhile, the Eurozone investor confidence increased for the fifth successive month in September to reach the highest level since pre-pandemic February. The Sentix Investor Confidence index improved to -8 in September, from-13.40 in August. Analysts polled by Reuters had anticipated a reading of -10.50. The reported figure has kindled hopes that an economic rebound from Covid-19 induced crises is on track. The current situation index improved to -33 in September from -41.3 in August, reaching its peak since March when Germany entered lockdown to contain the spread of COVID-19.

Sentix managing director Manfred Huebner cautioned that “The recession has not yet been overcome.”

The expectations index for the Eurozone inched upwards to 20.80, from 19.30 in August.

Huebner stated, “The way out of the recession is long and also for Germany investors doubt that the corona collapse can be completely compensated within one year.”

The mixed economic data from both the Eurozone and Australia is expected to keep the EUR/AUD pair range-bound with a slight bearish bias.

Technically, the EUR/AUD pair is declining after facing resistance at 1.6275. The next support is anticipated only near 1.6165. The currency pair is trading below its 50-day moving average. Furthermore, the momentum indicator is descending. Therefore, we can expect the currency pair to remain in a downtrend in the short-term.

AUD - technical analysis - 8th September 2020

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

Sammy

Sammy

Sammy is our forex expert, with over 20 years experience in the financial sector, she will be keeping you up to date with the ups and downs of currencies around the world


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