Australian wage growth edged higher in the fourth quarter, rising 2.3% YoY, just shy of the consensus of 2.4%. On a quarterly basis, wages rose 0.7%, matching the forecast. Wages are moving higher, but likely not fast enough to move the needle on the RBA’s rate plans. Wage data is keenly monitored by the RBA, which has insisted that inflation will not be sustainable in its target of 2-3% unless wage growth is much higher. With the pace of wage growth lagging behind inflation, which is around 3.5%, the RBA can continue to preach patience, although the markets are more hawkish and have priced in five rate hikes this year.
The Australian dollar has jumped higher, as investors are once again showing an appetite for risk assets, despite the ongoing crisis in Ukraine. The U.S. and other western countries slapped sanctions on Moscow in response to Russian forces entering eastern Ukraine, and the White House sharpened its language, saying an invasion has begun. Nevertheless, the markets were somewhat relieved that the sanctions were not more severe, leaving a small crack for diplomacy, should the Russians wish to lower the temperature.
The Federal Reserve is widely expected to raise rates at its March meeting. The most likely scenario is a traditional hike of 25 basis points, but just a week ago there was a reasonable likelihood of a 50-basis-point move. However, the Ukraine crisis and the surge in oil prices could trigger stagflation, and central bankers may decide that it is prudent to hold off from a rate hike in the present circumstances. Even if the Fed pushes ahead with a rate hike in March, the Ukraine standoff could well slow down the Fed’s plans to raise rates, especially if there is an invasion and oil prices go through the roof.
AUD/USD Technical
- AUD/USD is putting strong pressure on resistance at 0.7242. Above, there is resistance at 0.7306
- There is support at 0.7100 and 0.7022
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