Australia’s unemployment rate rose to 4.5% in September, up from 4.3% in August, according to the Australian Bureau of Statistics. This increase was above the expected 4.3%. In September, employment changed by an increase of 14.9K, a recovery from the previous loss of 11.8K in August, while forecasts had anticipated a growth of 17K. The participation rate also climbed to 67%, up from 66.9%.

Employment Changes

Full-time employment increased by 8.7K, bouncing back from a previous decline of 48.6K. Part-time employment grew by 6.3K, compared to a prior increase of 36.7K. The employment-to-population ratio remained at 64.0%. The rise in unemployment partly stemmed from more people, both men and women, looking for work. The number of unemployed men rose by 24,000 to 370,000, while the number of unemployed women increased by 10,000 to 314,000. Following this news, the Australian Dollar (AUD) decreased in value, trading 0.45% lower against the USD on the same day. The AUD notably weakened most against the Swiss Franc during the week. The Reserve Bank of Australia has kept the Official Cash Rate steady at 3.6%, showing signs of recovering demand. Labor market data remains crucial for monetary policy, shaped by the current employment trends.

Market Impact

The unexpected rise in unemployment to 4.5%, the highest level since late 2021, indicates a weakening Australian labor market. This surprise significantly reduces the chances of the Reserve Bank of Australia (RBA) raising rates further. For traders, it strengthens a bearish outlook on the Australian dollar, with increased odds of a future interest rate cut. We have noticed the unemployment rate steadily climbing from below 4% in 2023 and 2024. The RBA’s aggressive rate increases during that time, which drove the cash rate to a peak of 4.35%, aimed to cool the economy. Today’s data suggests that this cooling is accelerating. The current cash rate of 3.6% aligns with an easing cycle, which this report may extend. In the upcoming weeks, we should consider buying put options on the AUD/USD, aiming for a drop below the 0.6400 support level. This strategy allows us to profit from a falling Australian dollar while limiting potential losses to the premium paid. The market reacted sharply, pushing the AUD/USD down nearly half a percent, indicating quickly building bearish sentiment. The data also shows the Aussie dollar’s general weakness, especially against safe-haven currencies like the Swiss Franc. Therefore, shorting the AUD/CHF cross could be a smart move, particularly given ongoing global uncertainties such as the U.S. government shutdown. This approach targets the specific weakness in the Australian economy versus a more stable currency. With speculation that the US Federal Reserve might also cut rates, betting directly on Australian monetary policy is another strong strategy. We could explore interest rate futures to position ourselves for the RBA responding to this weaker employment data. This strategy zeroes in on the domestic situation, minimizing distractions from changing US policies. Create your live VT Markets account and start trading now.

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