Forex Flash: AUD in the doldrums after rough week – Westpac

The AUD has had a rough week – retail sales posted back to back declines in Nov and December, against expectations for at least a statistical bounce. Moreover, the AUD also emerged weaker after the January labor force data today, as the 10K jobs gain hid a -10K fall in full time employment while the steady 5.4% unemployment rate was aided by the participation rate falling to 65.0%, a new low since November 2006. Finally, “Tuesday’s RBA statement did the AUD no favors either as the steady hand at 3.0% was as we and most forecasters expected, with market pricing also above 80%.” writes Sean Callow, a Global FX Strategist at Westpac.

However, while the statement noted that global economic downside risks appear to have abated and that there are signs that the easier conditions are having some of the expected effects on the domestic economy (i.e. previous rate cuts are belatedly having an impact), Governor Stevens saved his most potent line for the final paragraph. Here he declared that the current inflation outlook “would afford scope to ease policy further, should that be necessary to support demand.”