AUD/USD – Job market data may conclude tapering debate

on Sep 6, 2013
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**iNVEZZ.com, Friday 6 September:**

Today’s market attention is focused on the US employment report for August, due out in half an hour at 13.30 BST, with the release widely expected to determine whether the FOMC will announce a start to tapering at its next meeting . Most market observers believe the Fed will start curbing bond purchases this month, but it is definitely not yet a done deal.

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US Fed chairman Ben Bernanke is on record that quantitative easing will be halted when unemployment has dropped to seven percent. US monetary policy has an embedded threshold in its forward guidance which is tied to the unemployment rate and which says that “the low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6.5 percent”. While the Fed initially forecast the target level to be reached in 2015, the surprisingly strong recovery in America has shifted market expectations to a nearer-term scenario and caused 10-year treasury rates to double in the past five months to three percent.

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Last year Credit Suisse extrapolated from the trend in the unemployment rate to project the 6.5 percent objective being reached in 2014. The actual jobless rate has since tracked the Credit Suisse trendline and in May this year the Federal Reserve started to signal tapering on the footing that the target level could indeed be reached by the middle of next year. The market consensus for the unemployment rate in August of 7.4 percent is at the top end of the trendline and supports an actual lower level than the anticipated unchanged number from July(see chart below).

!fm[](/uploads/story/5321/1.png)

The other highlight in today’s US labour market report will be the publication of Non-farm Employment Change, with analysts’ estimates for 175,000 new jobs after the disappointing 162,000 in July. The expectation range, from 150,000 to 243,000, suggest an optimistic bias among experts, backed by the sharp expansion of employment in the August ISM Non-manufacturing PMI (57 versus the prior 53.2).

Earlier today, the Australian Industry Group released its Construction Index for August, which recorded a deterioration to 43.7 from July’s 44.1. The gauge has been in a state of contraction since July 2010albeit that pessimism has this year eased a little.
Currently the AUD/USD is trading around 0.9159, up 0.39 percent intraday

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Currency Briefing: Fed taper still in sight AUD/USD – Sizeable Oz trade deficit rattling bulls

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http://nvz.bz/18TLOjb

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