AUDNZD In Play
AUDNZD climbed sharply higher after a pair of employment reports (in Australia and New Zealand) exposed the vastly differing conditions of labour markets on either side of the Tasman. NZDUSD dropped 80 pips after New Zealand’s Q3 unemployment rate wildly missed consensus forecasts. Instead of dropping to 6.7% as the market had expected, the rate rose to 7.3%. We have to look back over two years to find a miss of this magnitude. The participation rate didn’t budge either, so the poor outcome cannot be explained away by assuming an increase in the number of people looking for work. By contrast, Australia’s unemployment rate was steady at 5.4%, boosting AUDUSD 30 pips at one point. At a midnight vote, the Greek parliament approved the latest round of austerity measures by a majority of 153 to 128. Dissenters emerged from within the ranks of the three-party coalition government however, and consequently six deputies were expelled from PASOK and another one from Prime Minister Samaras’ ND party. The government still commands a majority, but now the support of the third party (Democratic Left) is needed more than ever. It is not confidence-inspiring that this party chose to abstain from the overnight vote rather than support it. A second vote on the wider issue of next year’s budget is scheduled for midnight Sunday, but given the austerity measures (approved overnight) are the most contentious component of next year’s budget, it seems likely Sunday’s vote will also be approved – again with a slender majority. Meanwhile investors continue to digest the outcome of the US election. USDJPY has traded back below 80.00, and risk appetite more broadly looks vulnerable in the wake of a 2.4% drop in the S&P500. Today, Bank of England and ECB policy decisions are due, but our economists expect no change to policy settings. Our US economists look for a sharp drop in today’s US jobless claims – purely on the back hurricane-related disruption. We would not be inclined to chase any subsequent USDJPY rally as the numbers are due to deteriorate again in the weeks that follow.
Click here to read the full report: UBS Morning Adviser Europe
UBS Investment Bank