In an effort to curb inflationary pressures, yesterday the Peoples Bank of China announced a 25 bps increase in benchmark interest rates to represent the third increase in five months. Despite a recent moderation in consumer prices, the news of China's rate hike came as little surprise to investors with Chinese officials flagging their intent to stem the flow of surging consumer price by means of monetary policy.
The ensuing minutes of the release saw the Aussie dollar retreat over 40 pips hitting lows of 101.14 US cents. Nevertheless, as US markets managed to stave off China concerns the local unit followed suit, with price action once again finding its feet to peak above the 101.8 US cents levels before once again correcting to current levels of 101.45 US cents.
From a technical perspective we're seeing reasonable support for the Aussie around the 101.1 US cent levels with ceiling for price activity just shy of 101.9 US cents. We're going to need to see some robust support from local and Asian equities for the Aussie to resume an upward trajectory - the large question mark is how Chinese financial markets will react after a 5 day break, this is likely to be a key directive for the local unit throughout the domestic session.
The main event this week employment data which is expected to show the Australian economy created 20,000 new jobs in January against previous growth of 2,300. Recent releases have seen a significant deviation from estimates surprising mostly to the upside - however we may very well be in for a surprise to the downside tomorrow.
There's little doubt the impact of Queensland's flood and cyclone disasters will take its toll on employment growth - and tomorrow could present the first real signs of Queensland's natural disasters resonating through the economy.