The Australian dollar climbed during Asian trading on Thursday, building momentum against the US dollar as stronger-than-expected employment figures reduced expectations of an imminent rate cut by the Reserve Bank of Australia. The currency’s rally followed a mid-week pullback, with markets reassessing the likelihood of monetary policy easing.
The AUD/USD pair gained 0.4% to reach 0.6422. This rebound came after Wednesday’s 0.65% decline, which interrupted the currency’s ascent toward recent highs near $0.6515 achieved last week.
Australian Labor Market Outperforms Expectations
April’s employment report delivered positive surprises across key metrics:
The unemployment rate held steady at 4.1%, matching both March’s figure and analyst forecasts
Employers added 89,000 new positions, significantly surpassing the anticipated 20,900 gain
March’s job creation was revised downward slightly to 32,200 from the initially reported 36,400
This robust labor market performance has intensified inflationary pressures, complicating the RBA’s policy calculus ahead of its May meeting.
RBA Rate Decision Hangs in Balance
Market expectations have shifted dramatically following the jobs data:
Immediate rate cut probability for May has fallen to 75% from previous certainty
Year-end rate projections have been revised upward to 3.1% from 2.85% previously
The central bank maintained its 4.1% benchmark rate in April while signaling potential May easing
The easing of global trade tensions has further reduced the urgency for aggressive rate cuts, with analysts now anticipating a more modest easing cycle.
Conclusion
The Australian dollar’s resurgence reflects shifting expectations about the RBA’s policy path as domestic economic strength collides with global monetary trends. With inflationary pressures persisting in a tight labor market, the central bank may adopt a more cautious approach to rate adjustments. Traders will closely monitor upcoming economic indicators and the RBA’s May decision for further direction in currency markets.
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