As China celebrates the founding of the People's Republic of China throughout the week, we will be following the latest unemployment figures from the eurozone and the United States. The Reserve Bank of Australia and the Reserve Bank of New Zealand will vote on interest rate changes, but the consensus view is that both central banks will leave rates unchanged.
Monday 2.10. 09:00 GMT, Euro Area Unemployment Rate (August)
The unemployment rate is the percentage of people without a job actively seeking employment in the previous month relative to the total number of people of working age or in the labour market. A high unemployment rate means that a large number of people are out of work despite actively seeking employment. A low unemployment rate indicates a stable labour market and greater availability of jobs.
Unemployment rates are important for economic analysis and can affect social and economic aspects. A high unemployment rate is associated with lower incomes and increased poverty, while a low unemployment rate promotes increased wages and social welfare. Governments and policymakers monitor the unemployment rate to assess the effectiveness of employment policies and take action to create jobs and support the unemployed. However, it should be remembered that the unemployment rate is one of many tools for assessing the labour market. Analysing other indicators, such as the labour force participation rate or wages, is also important.
Due to the vast amount of data to be collected from each eurozone Member State, the overall unemployment rate in the common currency area is published with a delay. In the upcoming announcement, data for August 2023 will be reported. In July, the eurozone saw its seasonally adjusted unemployment rate remain at a historically low level of 6.4%, aligning with market expectations. This figure marked a decrease from the 6.7% rate recorded one year earlier. However, there was an increase in the number of unemployed individuals, rising by 73 thousand compared to the previous month, bringing the total to 10.944 million.
The youth unemployment rate, which gauges individuals under 25 seeking employment, held steady at a historic low of 13.8% in July 2023, showing no change from the preceding month. Among the largest economies within the eurozone, Germany boasted the lowest unemployment rate at 2.9%, while the highest rates were observed in Spain (11.6%), Italy (7.6%), and France (7.4%).
Source: Tradingeconomics.com
A higher-than-expected reading may have a bearish effect on the EUR, while a lower-than-expected reading could be bullish for the EUR.
Impact: EUR
Tuesday, 3.10. 03:30 GMT, Australia Interest Rate Decision
Reserve Bank of Australia (RBA) board members vote on whether to raise, decrease, or leave interest rates unchanged. These decisions affect the currency's value, and interest rate policy is among the key instruments to regulate inflation. Investors closely follow central banks' decisions and changes in the level of interest rates, as this information can be crucial to their trading strategies. The currency's value tends to rise when interest rates are high, as they attract investors seeking higher returns on their deposits. Conversely, when interest rates are low, the currency's value tends to fall as investors look for other places to invest their money.
During the most recent meeting under the leadership of Governor Philip Lowe, the Reserve Bank of Australia voted to keep its cash rate steady at 4.1%, marking the third consecutive month of maintaining the rate, which was consistent with market expectations. The Board acknowledged that while inflation had peaked, it remained elevated and was anticipated to remain so for an extended period.
The central bank reiterated its stance that a further tightening of monetary policy may be necessary to bring inflation back to the target range of 2% to 3% within a reasonable time frame. It emphasised that any adjustments to the interest rate would depend on evolving economic conditions and price dynamics.
In its projections, the Board expected inflation to reach around 3.25% by the end of 2024 and to return to the target range by the end of 2025. Meanwhile, the Australian economy was described as experiencing subdued growth that was expected to persist for some time. In addition, the forecast pointed to a gradual rise in unemployment to around 4.5% by the latter part of the following year.
Source: Tradingeconomics.com
A higher-than-expected rate may be positive for the AUD and negative for the stock market, while a lower-than-expected rate may be negative for the AUD and positive for the stock market.
Impact: AUD, S&P/ASX 200
Wednesday, 4.10. 01:00 GMT, New Zealand Interest Rate Decision
The Reserve Bank of New Zealand has also decided to maintain the official cash rate (OCR) unchanged in its latest meeting, however, at a higher rate of 5.5%. The Board acknowledged that the series of rate hikes, totalling 525 basis points since October 2021, had led to monetary conditions that were constraining spending and alleviating cost pressures.
Nevertheless, the persistently high inflation continued, and the OCR needed to remain at a restrictive level to guide inflation back within the target range of 1% to 3% annually by the second half of 2024. The RBNZ's outlook still indicated that the OCR would peak at its current 5.5% level, with a potential upward risk for further rate increases. However, the central bank no longer anticipated the possibility of a rate cut until the first half of 2025.
While maintaining a balanced view of the risks to the inflation outlook, the Committee highlighted the possibility that economic activity and inflation measures might not slow as much as expected. Looking ahead, there was concern that a slowdown in overseas demand, particularly in China, could put significant pressure on New Zealand's exports over the medium term.
Source: Tradingeconomics.com
A higher-than-expected rate may be positive for the NZD and negative for the stock market, while a lower-than-expected rate may be negative for the NZD and positive for the stock market.
Impact: NZD, S&P/NZX
Friday 6.10. 12:30 GMT, US Unemployment Rate (September)
In the US, the unemployment rate has followed a different path to that in the eurozone. While nearly two times lower than in the eurozone, the US unemployment rate has fluctuated in recent months. In August 2023, the US witnessed an uptick in the unemployment rate, which reached 3.8%, marking the highest rate since February 2022 and surpassing the market's anticipated 3.5%. This increase resulted in a rise of 514 thousand unemployed individuals, bringing the total to 6.355 million, while employment levels experienced a modest increase of 222 thousand, reaching a total of 161.484 million.
Additionally, the U-6 unemployment rate, a comprehensive measure that includes individuals who desire employment but have discontinued their job search, as well as those working part-time due to a lack of full-time opportunities, also increased in August. It reached 7.1%, the highest level since May 2022, compared to the 6.7% recorded in July. On a positive note, the labour force participation rate increased to 62.8% in August, marking its highest point since February 2020, surpassing the July rate of 62.6%.
Source: Tradingeconomics.com
A higher-than-expected reading may have a bearish effect on the USD, while a lower-than-expected reading could be bullish for the USD.
Impact: USD
Stocks to watch
Tesco (TSCO) announcing its earnings results for the quarter ending on 08/2023. Forecast EPS: 10.04. Positive earnings surprise in 0 out of the last 10 reports. Time: Wednesday, October 4, before the market opens.
Constellation Brands A (STZ) announcing its earnings results for the quarter ending on 08/2023. Forecast EPS: 3.35. Positive earnings surprise in 7 out of the last 10 reports. Time: Thursday, October 5, before the market opens.
Tilray (TLRY) announcing its earnings results for the quarter ending on 08/2023. Forecast EPS:
-0.0992. Positive earnings surprise in 3 out of the last 10 reports. Time: Friday, October 6.
Santa Zvaigzne-Sproge, CFA, Head of Investment Advice Department at Conotoxia Ltd. (Conotoxia investment service)
Materials, analysis, and opinions contained, referenced, or provided herein are intended solely for informational and educational purposes. The personal opinion of the author does not represent and should not be constructed as a statement, or investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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