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Over-Arching USD Weakness Buoys Energy, Metals

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WSJ RBA watcher James Glynn has noted that "things are clearly running white-hot. It is now within the realm of possibility that by the end of 2021, the unemployment rate will approach something like 4.5%, a level the RBA itself has held up as being consistent with tight job-market conditions and the start of wage increases across the economy. If it comes to pass, Mr. Lowe will find it difficult to continue talking up 2024 as a realistic time to raise the official cash rate from its current level of 0.10%. The timeline will almost certainly need to be brought forward, perhaps dramatically. Mr. Lowe has said he wants wages to grow by about 3.5% a year before he tightens the policy screws. Only then will inflation be sustainably within the central bank's 2%-3% target. Wages are currently growing 1.5% annually. But while it feels like there is time for the RBA, the rate at which the job market is tightening is remarkable, and policy recalibration will likely be required soon. The closure of Australia's international border amid the pandemic is also a factor. It has dried up the inflow of skilled labor and population growth has stalled. There aren't any plans to reopen the border for another year, given the continued risk of importing another wave of Covid-19 cases. This alone is already fanning wage hotspots in places like hospitality."

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