Australian Dollar Recovers Above $0.69 vs US Dollar After Jobs Shock Cuts RBA Hike Bets
Crédit Agricole retains its Australian Dollar recovery forecast, arguing that weaker jobs have yet to remove the RBA’s case for tackling inflation.
The Australian Dollar-to-US Dollar exchange rate recovered to US$0.6942 on Friday evening, up 0.35% from Thursday’s close, after September’s employment slump weakened expectations for further Australian rate increases.
Euro to Australian Dollar (EUR/AUD): 1.618195 (-0.16%)
Crédit Agricole has kept its end-2026 AUD/USD forecast at 0.69, close to Friday’s rate, but still expects the currency to reach 0.73 by December 2027.
Its recovery case depends in part on inflation remaining persistent enough to preserve Australia’s interest-rate advantage, even as the labour market weakens.
Westpac economist Luka Belobrajdic writes: “Australian government bond yields fell following weaker labour market data, with both the 3-year and 10-year yields declining 10bps.”
His early-Friday report adds: “The probability of a November hike fell to just above 12%, taking the implied year-end cash rate to 4.73%.”
The current cash rate is 4.60%, following September’s quarter-point increase.
Reduced expectations for further rises weaken the appeal of Australian assets to investors seeking interest income.
Part-time losses account for September’s jobs decline
The ABS reported a 39,300 fall in employment in September.
Part-time employment fell by 73,700 while full-time employment rose by 34,400, and total hours worked increased slightly.
A drop in participation also limited the increase in unemployment, which reached 4.7%.
The release has strengthened the argument for an RBA pause, although Crédit Agricole’s senior FX strategist David Forrester cautions against assuming the central bank will treat it as decisive:
“It is worth noting that the RBA has raised doubts about the labour market data, which has become even more volatile than usual due to the ABS introducing a new survey method. So, the labour market data will carry less weight than usual with the RBA leaving another rate hike on the table.”
The ABS says residual effects from changes in supplementary-survey collection may still be influencing September’s figures, but its quality checks found the statistics fit for use.
It recommends the trend estimates for judging underlying conditions.
Those showed employment rising by 15,700 and unemployment holding at 4.6% in September, contrasting with the seasonally adjusted jobs decline.
Over the year, however, trend unemployment was up 0.3 percentage points, while the proportion of workers wanting more hours had also increased.
Forrester writes: “The trend labour market data points to a grind higher in the unemployment rate as well as broader measures of labour market slack including the underemployment and underutilisation rates.”
The RBA has already accepted a cost to employment
The policy question is how much cooling the RBA considers necessary to bring inflation back under control.
Its September meeting minutes show officials willing to accept slower growth in demand and employment in response to more persistent cost pressures.
The minutes predate the latest jobs figures.
Policymakers were concerned that underlying inflation reflected greater domestic capacity constraints, with weak productivity keeping labour costs elevated even without particularly strong wage growth.
Crédit Agricole describes the resulting support for the currency:
“The AUD is clinging to its rate advantage as sticky inflation forces the RBA to continue raising rates even while other central banks join the tightening cycle, making the currency a favoured carry trade.”
Forrester records the repricing after the jobs release:
“Weak labour market data has seen the Australian rates market reduce pricing for further rate hikes from another hike as a certainty with some chance of two more 25bp rate hikes by mid-2027 to pricing in only a strong chance of another 25bp rate hike by mid-2027.”
UBS also projects AUD/USD at 0.73, although it reaches that level by September 2027, three months earlier than Crédit Agricole.
The next Australian inflation release on 28 October will include the September-quarter figures.
It follows August’s annual headline inflation of 4.0% and trimmed-mean inflation of 3.6%, a measure that reduces the influence of unusually large price changes.
Forrester expects the RBA to resist those softer rate expectations:
“The views of RBA Deputy Governor Andrew Hauser and Assistant Governor Chris Kent on the recent labour market data will be key drivers of the AUD in the coming week. We think that both will remain hawkish pointing to inflation being the ultimate determinant of the next move in rates.”
AUD/USD Exchange Rate FAQ
What does Crédit Agricole forecast for AUD/USD?
It forecasts 0.69 at end-2026 and 0.73 by December 2027. UBS projects 0.73 by September 2027.
Has September’s jobs report ruled out another RBA hike?
No. It weakened market expectations for further increases, but Crédit Agricole argues that inflation could still require another move.
When is Australia’s next inflation release?
The ABS schedules the September release for 28 October, including September-quarter figures.
