Aussie to remain supported as the other western central banks are one step ahead of the RBA – Commerzbank

The Australian labor market disappointed again in January. Economists at Commerzbank analyze Aussie’s outlook after January employment data.

Labor market continues to slow down

Instead of the solid 25,000 job gains expected by the Bloomberg consensus, just under 500 jobs were added.

For the Reserve Bank of Australia, this is likely to mean that it will not raise interest rates any further, although it did not explicitly rule this out after its last decision. Instead, it is likely to keep rates higher for a longer period of time before inflation is brought under sustainable control. 

Only if we see more months of a weaker labor market will it likely move up the timing of the first rate cut. Until then, the Aussie is likely to remain supported as the other Western central banks are one step ahead of the RBA and are already discussing rate cuts.