Tuesday, May 21, 2024

AUD to USD Forecast: Chinese Stimulus and US Jobs Report Impact

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A sizeable stimulus package would support the Chinese economy and drive demand. China accounts for one-third of Australian exports. Australia has a trade-to-GDP ratio above 50%, with 20% of the workforce in trade-related jobs. A pickup in demand would be a boon for the Australian economy and the Aussie dollar.

US Economic Calendar: US Jobs Report Takes Center Stage

On Friday, the US Jobs Report will be in focus. Recent US labor market data reflected tight labor market conditions. However, the US Jobs Report will have the final say. Wage growth, nonfarm payrolls, and the unemployment rate need consideration. A steady unemployment rate and a pickup in wage growth could force the Fed to delay rate cuts into Q2.

Tight labor market conditions support wage growth and increase disposable income. Upward trends in disposable income could fuel consumer spending and demand-driven inflation. A pickup in inflationary pressures could force the Fed to leave rates higher for longer. A more hawkish rate path would impact disposable income, curb spending, and dampen demand-driven inflation.

Economists forecast average hourly earnings to increase 3.9% in December year-over-year versus 4.0% in November. Significantly, economists predict the unemployment rate to rise from 3.7% to 3.8%.

While the US labor market is the focal point, investors must consider the ISM Services PMI. An unexpected increase in the Services PMI could reduce bets on a Q1 2024 Fed rate cut. The services sector accounts for over 70% of the US economy.

Beyond the numbers, Fed speakers also warrant investor attention. Reactions to the US Job Report would move the dial.

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