Australia jobs rebound failed to support the Australian dollar on Thursday, even after May employment beat forecasts and the jobless rate fell.
The Australian dollar slipped 0.2% to $0.6891. Meanwhile, three-year government bond yields fell four basis points to 4.371%, their lowest level since March. That market move pointed to a softer policy view despite the stronger headline data.
Traders looked past the top-line gain because the details were weaker. Part-time jobs drove the increase, while hours worked dropped 1.1%. In addition, job vacancies fell 2.1% in the three months to May, marking the first decline since late last year.
Australia Jobs Rebound Masks Weaker Details
The May result also mostly reversed April’s slump rather than showing new strength. Therefore, markets did not treat the report as a clear sign of fresh momentum.
Attention instead shifted to offshore factors. The Reserve Bank has raised the cash rate three times this year to 4.35%. The article said that move targeted an inflation impulse linked to the Middle East conflict and fuel costs.
However, oil has returned to pre-conflict levels, and a US-Iran roadmap is now in place. As a result, that inflation impulse is fading. The front end of the market reflected that change, with only about a one-in-five chance of an August move priced in.
Oil Reclaims the RBA Story
The market is also split on any further hike this year. Meanwhile, attention has started to turn to the first cuts in the second half of 2027.
The source said the May labour data does not settle that debate. When it held in June, the Board kept an explicit tightening bias. It said it would do what was necessary, including raising the cash rate target further if required.
Underlying inflation stands at 3.6%, which remains well above target. Analysts also differed on the report. AMP’s Diana Mousina said the figures showed conditions remain inflationary, while State Street’s Krishna Bhimavarapu said the data left room for an extended hold, with a late-year hike still possible.
Still, rates and currency markets signaled that the tightening cycle is most likely over, and the Australia jobs rebound did not change that view.
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