Australian Dollar Drops to Two-Week Low as September Job Losses Cool Rate Hike Expectations
The Australian Dollar vs. US Dollar (FX:AUDUSD) fell below $0.70 to hit a two-week low following weaker-than-expected employment data for September. Australia's unemployment rate climbed to 4.7%, surpassing forecasts of 4.6%, while the previous month's jobless figure was revised upward from an initial 4.6%. Total employment dropped by 39,300 jobs during the month, missing market projections for a 20,000 gain despite an addition of 34,400 full-time jobs.
The softer labor metrics suggest that monetary policy measures may be cooling the Australian economy. The Reserve Bank of Australia has raised its cash rate by 1 percentage point to 4.60% this year to curb inflation, executing one of the sharpest rate-tightening campaigns among developed countries. The latest job cuts indicate that labor market tightness is starting to ease after these cumulative increases.
Following the report, market participants scaled back their expectations for further monetary tightening. The implied probability of a rate increase in November fell below 20% from 35% earlier in the day, while expectations for a December move dropped to 40% from 60%. Investors will watch coming economic data and central bank commentary to see if rate policy remains on hold.
Key points
- The Australian Dollar vs. US Dollar (FX:AUDUSD) fell below $0.70, hitting its lowest level in two weeks.
- Australia lost 39,300 jobs in September compared to expected gains of 20,000, despite adding 34,400 full-time positions.
- The unemployment rate increased to 4.7% in September, exceeding the forecasted 4.6% rate.
- Market expectations for a November interest rate hike dropped below 20% from 35% earlier in the day.
- The implied probability of a December rate move decreased to 40% from 60% following the employment report.
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How we writeDisclaimerQuestions and answers
Why did the Australian dollar drop to a two-week low?
The Australian dollar fell after September labor data showed an unexpected loss of 39,300 jobs and an unemployment rate of 4.7%, prompting investors to lower expectations for future interest rate increases.
What was Australia's unemployment rate in September?
Australia's jobless rate rose to 4.7% in September, coming in above the expected 4.6%. The previous month's jobless rate was also revised upward from an initial reading of 4.6%.
How did the employment data impact Australian interest rate expectations?
Traders reduced the likelihood of a November rate hike to less than 20% from 35%, while the probability of a December increase dropped from 60% to 40%.