Article source: fxstreet.com
News traders, huddle up! We’ve got another big market-mover comin’ our way this week, as Australia is gearing up to release its February employment report on Thursday’s Asian trading session. Let’s go through our usual Forex Trading Guide routine to figure out how to profit from this economic event:
Why is this report important?
For the newbie forex traders out there, here’s a quick explanation on why employment data matters. As you’ve probably learned in the School of Pipsology section on Fundamental Analysis, a country’s currency usually appreciates when its economy performs well. Labor reports tend to act as leading indicators of growth because, well, people can’t spend much if they don’t have jobs!
Conversely, currency depreciation is typically seen when economic growth weakens or is expected to slow down. This might be the case for Australia, as their central bank recently cut interest rates in anticipation of a prolonged slump in hiring. The upcoming jobs release should show whether the labor market is in for a recovery or if it’s still stuck in a rut.
How did the previous releases turn out?
Australia’s January jobs report printed weaker than expected figures, with the employment change reading showing a 12.2K drop in hiring and the jobless rate jumping from 6.1% to 6.4%. Prior to this, Australia actually printed stronger than expected labor data in November and December last year.
What’s expected this time?
Economic analysts are expecting to see a 15.5K rebound in employment for February, which might be enough to keep the jobless rate steady at 6.4%. However, central bank officials seem to be bracing themselves for another weak reading, with last week’s RBA statement indicating that further monetary policy easing might be appropriate.
Other labor market indicators seem to be hinting at a downturn in hiring as well, as the ANZ job advertisements report has been printing smaller and smaller gains since December. This suggests that there might be fewer opportunities available in the jobs market, which explains why the participation rate hasn’t budged from 64.8%.
How might AUD/USD react?
Another weak jobs reading might lead to a sharp selloff for AUD/USD for two main reasons: 1) This could seal the deal for another RBA interest rate cut for their next policy meeting, and 2) The U.S. jobs situation is lookin’ mighty fine!
On the other hand, an upside surprise for the February jobs report might allow the Australian dollar to recover, as this could lower the odds of further RBA easing in the coming months. Better take a look at the underlying components of the report also since these might provide clearer clues on how Australia’s labor market is really doing.