The Australian dollar experienced a significant drop, falling 0.5 per cent to US64.85¢ following the release of concerning unemployment figures for September. The unexpected increase in the unemployment rate triggered a flurry of activity in the bond market, with bonds jumping in response. This surge in bond prices pushed the policy-sensitive three-year yields down by 12 basis points, settling at 3.36 per cent.
The yield curve also demonstrated a flattening trend, as the 10-year rate decreased by 6 basis points. These movements in the bond and currency markets reflect growing investor anxiety surrounding the strength of the Australian economy and the potential need for monetary policy intervention.
In response to the jobs report, money markets have sharply increased their bets on a potential easing of monetary policy by the Reserve Bank of Australia (RBA) as early as next month. Market expectations now indicate a 60 per cent probability of a rate cut in November, a notable increase from the 39 per cent chance priced in before the release of the latest employment data. This shift in market sentiment underscores the sensitivity of investors to economic indicators and their anticipation of central bank action to support economic growth.
