**AUD/USD Drops Sharply, ASX Sets Record High as Rate Cut Bets Surpass After Weak Jobs Data**
*Original Author: Fiona Cincotta, Forex.com*
The Australian dollar saw a significant decline as the latest jobs data from Australia signalled slowing economic momentum, fueling expectations that the Reserve Bank of Australia (RBA) could begin cutting interest rates sooner rather than later. Meanwhile, the ASX 200 soared to a record high, driven by the prospect of lower borrowing costs and a resilient global equity environment.
**Key Highlights:**
– AUD/USD slumped following disappointing employment figures
– ASX 200 surged to an all-time high
– Markets now anticipate RBA rate cuts earlier than previously priced
– Global factors, including US inflation and Federal Reserve expectations, also influencing sentiment
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## Soft Aussie Jobs Data Sparks Speculation of RBA Rate Cuts
Australia’s latest labor market figures underscored cracks in what had previously been considered a relatively resilient economy. According to the Australian Bureau of Statistics (ABS), the July employment report revealed:
– Unemployment rate edged up to 3.8%, from 3.5% the previous month
– Total employment fell by 24,000, a sharp contrast to expectations for a 15,000 gain
– The participation rate slipped, indicating that fewer Australians are actively looking for work
This softer-than-expected data has ignited speculation across financial markets that the Reserve Bank of Australia will have to ease policy sooner than anticipated. The labor market has until now been a pillar of support for RBA’s hawkish stance, but signs of slackening have prompted economists to review their interest rate forecasts.
### Economists Respond
Major Australian banks and international forecasters have swiftly revised their expectations for the RBA. For instance,
– Westpac now projects the RBA could cut rates by the fourth quarter of the year
– ANZ and CBA are pencilling in rate reductions as soon as late 2024, with the potential for two or more cuts through 2025 if economic weakness persists
– Several independent economists told Reuters that the softening employment figures are “likely the turning point” for RBA policy, with inflation appearing to moderate in recent months
### RBA’s Current Policy Stance
The RBA kept the cash rate unchanged at 4.35% in its latest meeting, emphasizing that future moves would be data dependent. Prior to the release of July’s labor numbers, markets were pricing in the likelihood of rates remaining on hold through much of 2024, with a very low probability of a hike or a cut.
The shift in market pricing underscores just how influential labor data is for policymakers. The jobs report acts as an early warning signal for broader economic softening, particularly in sectors such as construction, hospitality, and retail, which are already facing headwinds from higher rates and cost of living pressures.
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## AUD/USD Reacts: Resumption of Downtrend
The Australian dollar
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