August 2023 Wrap Up

What were the key moments in the market this month?

Curveball in the Aussie job scene 

New data on August 17 from the Australian Bureau of Statistics (ABS) revealed a drop of 14,600 jobs in July, stepping back from June’s leap of 31,600 and defying expectations of a 15,000 increase. The dip was primarily in full-time jobs, which saw a decline of 24,200. The jobless rate jumped to 3.7%, up from 3.5%, exceeding predictions of 3.6% and marking the highest rate since April. Although the job market took a hit in July, the ABS pointed out that employment remained positive for the year, attributing the slump to a seasonal slowdown.

“July includes the school holidays, and we continue to see some changes around when people take their leave and start or leave a job… Employment is still around 387,000 people higher than last July,” said Bjorn Jarvis, ABS head of labour statistics.

Yen Alert: Keeping tabs on intervention zone

As the yen tumbles past 145 against the dollar, questions arise about Japan’s intervention plans. Last year’s quick response may not repeat due to their current advantage from a weaker yen, courtesy of robust exports and cheaper oil prices. In Q2, a 6% economic growth surge was driven by strong exports and reduced oil-related costs.

The yen’s dip still hinges on a vital factor: a notable yield gap with the US. While the Bank of Japan eases ultra-loose policies and US rates plateau, the bond market keeps the yen’s fate intriguing for sellers.

On August 15, Finance Minister Shunichi Suzuki issued a reminder against causing volatility in the exchange rate. Suzuki warned that rapid moves are “undesirable” and the government is “ready to respond appropriately”.

Argentina shakes things up

On August 14, Argentina’s central bank made bold moves after a shocking win by far-right libertarian Javier Milei in the primary election. To soothe the markets, the country’s currency, the peso, was dropped by nearly 18%, and the benchmark interest rate was skyrocketed by 21 points to a staggering 118%.

Milei’s unexpected victory, scoring around 30% of votes, took everyone by surprise as markets had been banking on more moderate candidates. With the presidential election set for October, all eyes are on how this unexpected twist might shape the future course for Argentina’s politics and economy.

Gas up, inflation watch in Brazil

Brazil’s inflation forecasts are poised for revision due to the recent fuel price hike at Petrobras. The state-run oil giant’s decision to increase fuel prices is projected to have an impact of approximately 0.4 percentage points on inflation between August and September, according to statements made by Brazil’s central bank Governor Roberto Campos Neto during a session with lawmakers.

The central bank chief underlined that while the result of higher diesel prices was indirect, more expensive gasoline reflects directly on the benchmark IPCA inflation index.

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