AUD tumbles as jobless surge fuels bets on November RBA rate cut at the time of writing

Highlights:

• The Australian dollar (AUD) fell 0.5% to US $0.6485 at the time of writing after the unemployment rate rose to 4.5%, its highest level since 2021.
• Bond yields tumbled, with three-year yields dropping 12 basis points to 3.36% and ten-year yields falling 6 basis points, reflecting growing expectations of monetary easing.
• Money markets are now factoring in about a 60% likelihood of a rate cut by the Reserve Bank of Australia (RBA) in November, a sharp increase from roughly 39% prior to the release of the soft jobs data.

Australian dollar slides after weaker labour data

The Australian dollar dropped roughly 0.5 percent to US $0.6485 (64.85¢) following an unexpected increase in the unemployment rate for September, at the time of writing. The weaker jobs report rattled markets and bolstered expectations of imminent monetary easing by the Reserve Bank of Australia (RBA).

Bonds rally, yields retreat

Government bond markets responded strongly: the three-year yield fell by about 12 basis points to 3.36 percent, while the 10-year yield eased 6 basis points, contributing to a flattening of the yield curve.

Markets sharply upgrade rate-cut odds

With the labour data signaling cooling, money markets sharply raised the probability of a November rate cut by the RBA. The implied chance now stands at roughly 60–70 percent, up from about 39–40 percent prior to the report.

What the data shows

The unemployment rate rose to 4.5 percent, the highest since late 2021, surprising economists who had expected only a modest lift to 4.3 percent. Employment increased by approximately 14,900 people, but was overwhelmed by a larger labour force expansion as more people entered the job market. While weaker labour conditions favor easing, the RBA remains cautious because inflationary pressures — especially in services — are still closely watched. Policymakers are waiting for the upcoming September quarter inflation figures to tilt the balance.

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