Looking ahead, there is very little this week in the way of data for the Australian economy, but there is plenty on the schedule for the US. When it occurs, it implies that the bond market sees a problem further down the track, to the point that interest rates will need to be lower in the future relative to where they are in the near term. A flattening or inversion of the yield curve is seen as a potential harbinger of an impending economic slowdown.
The 3s 10s yield curve has inverted for the first time since the global financial crisis. They now see a bit over 50% probability of a 25 bp lift. Of note was the full-time boost of 61.7k and the nudge higher in the participation rate to 66.9% from 66.7%.īefore the jobs numbers, the futures market allocated about a 20% chance of a hike in the cash rate by the RBA at its July monetary policy meeting.
75.9k Australian jobs were added in the month, which was notably above the 17.5k expected to be added and -4.3k previously. The unemployment rate was 3.6% in May against the 3.7% anticipated and prior. CHART - AUD/USD, GOLD, COPPER, IRON ORE, WHEAT AND DXY (USD) INDEXĮlsewhere, domestic data tilted further toward another potential lift in rates from the RBA in a fortnight. The entire commodity complex appeared to benefit with gold, copper, iron ore and wheat the notable standouts for AUD. In the end though, it was the dominance of the US Dollar across markets that drove prices last week and the Aussie Dollar was in the thick of it. Likewise, the Bank of Japan left monetary policy unchanged at its ultra-loose setting but the European Central Bank hiked rates while the People’s Bank of China (PBOC) eased policy. Treasury yields dipped in the aftermath, undermining the ‘big dollar’. The Fed left rates unchanged at its Federal Open Market Committee (FOMC) meeting last Wednesday. Since the start of June, AUD/USD has gained in 15 out of 17 sessions. The Australian Dollar smashed through the resistance ceiling to make a 4-month high last week after the US Dollar collapsed.
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