Investing.com — The Australian dollar rose sharply on Thursday, rebounding from a one-year low after stronger-than-expected labor data raised doubts about the potential timing of an interest rate cut by the Reserve Bank of Australia.
The pair jumped 0.7% to $0.6411, rebounding sharply from its weakest levels since November 2023.
The rise in the currency came after November employment data showed a stronger-than-expected increase in, while Australia unexpectedly fell to 3.9% from 4.1%.
The reading indicated that the Australian labor market remains strong, undermining expectations of interest rate cuts by the Reserve Bank of Australia. Traders were seen sharply pulling back on their bets that the central bank will cut interest rates in February 2025, with the general consensus shifting further towards a cut in the second quarter.
“We expect the first rate cut to take place in May 2025. Weak economic data from the latest National Accounts release raised the risk of a February cut, but this labor market outcome offsets that risk to some extent,” ANZ analysts wrote in a note.
Bear Westpac also expects the Reserve Bank of Australia to begin cutting interest rates from May, in what is expected to be a shallow easing cycle.
The Reserve Bank of Australia held a meeting earlier this week, but it struck a less hawkish chord in the face of the country's declining economic growth.
But the bank has given little indication as to when it intends to start cutting interest rates, citing concerns about persistent inflation and the strength of the labor market.
