The Australian dollar has surged to a fresh 15-month high following the release of surprisingly strong jobs data. The robust figures have led traders to increase their expectations of an interest rate hike as early as next month. The Aussie dollar climbed to US67.83¢, a level not seen since October 2024, paving the way for a potential test of US69.42¢ reached in September 2024.
Financial markets are now pricing in a significantly higher probability of the Reserve Bank of Australia (RBA) lifting the cash rate in the coming month. Current market indicators suggest a 50 per cent chance of a rate hike next month, with a move fully priced in by May. Prior to the release of the jobs data, the implied probability of a rate hike next month was only 30 per cent.
The reaction in the bond market was also notable. The three-year bond yield experienced a sharp increase, spiking 9 basis points to 4.27 per cent, marking its highest level in over two years. Similarly, the 10-year bond rate rose by 6 basis points to 4.8 per cent, reflecting the market’s anticipation of tighter monetary policy. This data provides insight into investor sentiment and expectations regarding future economic conditions and monetary policy decisions.
