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Tag Archives: employment

Every country is looking at economic growth, labour, CPI and unemployment.  Australia is no different.

So at 8:23am, I put on my straddle with the following details: –

AUDUSD   0.7045   –   0.7065   –   0.7085 with spot at 0.7065 and SLs at spot

Employment came out whopping strong at 58K vs 15K forecast and unemployment rate dropped to 5.9% from 6.2%.

The AUD spiked up triggering my stop if bid order at 0.7085.  I sold half the position at 0.7140 and keeping the other half till Asia opens and clients starting coming in in the mid morning.

Unfortunately, the AUD didn’t really move very much more, so I closed the other half of the trade at about 10:30am at 0.7145.

Trading profits was 55bps and 60bps for an average of 57.5bps on $100Mn trade size.

It’s interesting the whole world was focusing on Janet Yellen’s speech and responses at the Senate Banking Committee on Tuesday and Wednesday.

All the major banks have concluded together with the media that the word, ‘patience’, will be dropped in March and any rate hike if any will happen in June.  Two dates momentarily cast in stone for now.

In my view, jobs creation, employment and unemployment are more important data compared to inflation for Janet Yellen.  Though, recent CPI data suggests low inflation and that the revised 1.7% target rate may not even be hit is a lesser concern, then non farm payrolls and unemployment.

If I study the history of the past Fed chairmans including Greenspan and Bernanke, they usually get ahead of the curve and market expectations.  They don’t like to be dictated by the media.

In the same tone, I believe Yellen will not subject herself to the pressures of the media, which is why her responses to Congress was non committal.

I believe she will pre-empt the markets and raise interest rates earlier than June.

I believe she will surprise the markets by raising rates in May.  As long as non farm payrolls stay above the average of 200,000 and higher, it will give her the confidence to make the decision.

A strong US dollar is not necessarily a bad thing for the United States.  Let’s not forget that the U.S., is a domestic economy and it only exports barely 6% of its GDP.

Therefore, ensuring that employment stays strong and wages bouyant will give Yellen the confidence to raise rates.  High employment and good wages means American can better support consumption which is a main driver of the economy.

I believe inflation is on the rise in the U.S., although it doesnt seem to be manifesting in the data.  Real estate prices are at all time highs and so is the financial markets thanks to cheap liquidity.  However, can it be said that the fundamentals are supporting the real estate market  and financial market?

Let’s see.