Investing.com — The Australian dollar rose sharply on Thursday, recovering from a one-year low after stronger-than-expected labor data raised doubts about the possible timing of interest rate cuts by the Reserve Bank of Australia.
The pair rose 0.7% to $0.6411, recovering sharply from its weakest level since November 2023.
The spike in the currency came after labor data for November showed a stronger-than-expected rise in the , while the Australian index unexpectedly fell to 3.9% from 4.1%.
These figures showed that the Australian labor market remained robust, undermining expectations for rate cuts from the RBA. Traders saw sharp cuts in expectations that the central bank would cut rates in February 2025, with the general consensus shifting more towards a cut in the second quarter.
“We expect the first rate cut to take place in May 2025. Softer economic data from the recent national accounts release increases the risk of a downgrade in February, but this labor market outcome goes some way to offsetting that risk,” ANZ analysts wrote in a note.
Peer Westpac also expects the RBA to start cutting rates from May, in what is expected to be a shallow easing cycle.
The RBA met earlier this week but took a slightly less aggressive tone in light of the country’s slowing economic growth.
But the bank gave little indication of when it plans to cut rates, citing concerns about persistent inflation and the strength of the labor market.
