Response to the wage data earlier by Westpac senior currency strategist, Sean Callow

  • Interest rate markets had already unwound a lot of the risk of RBA hiking this year
  • That is helping to limit the damage to the AUD after the soft data earlier
  • Stakes are "very high" for Australian policymakers when it comes to wage growth
  • Federal budget forecast growth in wages to accelerate over 2018/19
  • Data earlier adds to the "burning question" of why wages growth would accelerate over the next year or two if job creation is set to slow and unemployment rate is likely to hold above 5%

The data release can be found here. Although the quarterly estimate missed expectations (prior also revised lower), the yearly estimate held steady and met expectations but overall it's a softer report given the former.

Callow also says that the AUD should be mostly driven by offshore factors for the time being. He argues that the USD doesn't seem to have another obvious short-term catalyst, so it may lose some momentum, which should be enough for AUD/USD to avoid lows near 0.7400.