Australian Dollar pares gains after strong wage growth
|The Australian dollar continues to climb and has put together a five-day winning streak. The Aussie rose as much as 0.36% earlier but has pared most of these gains and is currently trading at 0.6552 in the European session, up 0.05%.
Wage price index climbs 4.2% in Q4
Australia’s wage price index (WPI) rose 4.2% y/y in the fourth quarter, up from a revised 4.1% gain in the third quarter and above the market estimate of 4.1%. This was the highest reading since Q1 of 2009, as wages rose in both the public and private sectors. Significantly, this was the first time since 2021 that the WPI has exceeded consumer price inflation, which is running at 4.1%.
The rise in annual wage growth grabbed the headlines and gave a boost to the Australian dollar, but on a quarterly basis the numbers paint a different picture. Wages rose 0.9%, easing from the 1.3% gain in the fourth quarter. The decline in wage growth could signal that robust labour market is showing cracks, which would be a welcome sign for the Reserve Bank of Australia in its campaign to bring inflation back down to the 1 to 3 percent target band.
The markets believe that the RBA’s tightening cycle is over but aren’t expecting interest rates to come down in the near term. Investors have priced in only 38 basis points in cuts in 2024, with an initial cut not expected until August or September. The RBA is unlikely to jump on the rate-cut bandwagon until it is convinced that inflation will continue to fall or the strong labour market shows signs of cooling.
AUD/USD technical
-
AUD/USD tested resistance at 0.6570 earlier. Next, there is resistance at 0.6608.
-
0.6570 and 0.6608 are providing support.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.