- Risk on narrative as economies reopen supports Australian Dollar (AUD)
- 5 million jobs created in May vs -8 million lost expected
- 3% unemployment rate vs. 19% exp. & 14.7% in April
- At 14:00 UTC, AUD/USD trade +0.65% at US$0.6989
The risk sensitive Australian Dollar is charging higher for a seventh straight session versus the US Dollar on Friday. The Aussie Dollar rally is showing no signs of running out steam, heading into the weekend on track to gain 4.7% across the week.
At 14:00 UTC, AUD/USD is trading +0.65% at US$0.6989, after easing back from a fresh 5 month high of US$0.7013 struck earlier in the session.
The Aussie Dollar is trading around levels last seen at the start of the year as the risk on narrative remains in full swing. Investors continue to be optimistic as economies reopen, central banks stay supportive and data starts to show signs of improvement.
The Australian Dollar has recouped all losses suffered in the wake of the coronavirus crash as increased risk appetite supports the riskier perceived Aussie Dollar whilst dragging the safe haven US Dollar lower.
Today’s non farm payrolls have added to the risk on theme, completely smashing expectations. The May jobs report showed an unexpected rise in the number of jobs created in the US, 2.5 million in total. Analysts had been expecting 8 million job losses.
The unemployment rate unexpectedly fell to 13.3% in May, down from 14.7% in April. Analysts had been expecting an increase to 19.5%, which would have been the worst level since the Great Depression of the ‘30’s.
The report runs until the 12th of the moth so would have included the early stage reopening of some states after the lockdown. Overall, these figures show that the US economy is in a much better place than was initially feared. The economy is showing more resilience than analysts had hoped.
Ahead of the May jobs report, other surveys earlier in the week also showed some encouraging signs indicating that today’s numbers could be better than forecast. The closely followed ADP private payroll report had also beaten forecasts falling 2.76 million against the 9 million drop pencilled in.
Investors will now look ahead to the Federal Reserve monetary policy meeting next week to see what these significantly better than anticipated numbers mean for monetary policy and the outlook for the US economy.
