AUD/USD dips below 0.6500 as unemployment rises, RBA rate-cut bets increase

• Australia's Unemployment Rate rises to 4.5% in September, the highest since 2021.
• Expectations grow for further rate cuts by the Reserve Bank of Australia.
• The USD remains under pressure amid the government shutdown and dovish Fed outlook.

AUD/USD declines by 0.38% on Thursday to trade around 0.6490 at the time of writing, back below the 0.6500 mark, weighed down by weaker-than-expected labor market data pointing to a slowdown in job demand in Australia.

According to the Australian Bureau of Statistics (ABS), the Unemployment Rate rose to 4.5% in September, up from 4.3% in August (revised from 4.2%) and above market expectations. This is the highest reading since November 2021. Meanwhile, Employment Change came in at 14.9K, missing forecasts of 17K, following 11.8K job losses in August. The report confirmed softer labor demand, reinforcing speculation that the Reserve Bank of Australia (RBA) could resume monetary easing in the coming months.

RBA Governor Michele Bullock said on Wednesday that a pickup in household spending and stronger readings in some inflation components prompted policymakers to remain cautious before implementing additional rate cuts. Meanwhile, RBA Assistant Governor Christopher Kent noted that financial conditions are now "less restrictive" after recent rate reductions and that policy is "within a broad, uncertain neutral range," pending further data.

According to ING analyst Francesco Pesole, the rise in unemployment does not necessarily mean the RBA will act immediately. He argued that the central bank is likely to wait for third-quarter inflation data due later in October before deciding on the next move: "We think a rate cut in December remains the most likely scenario," he said.

At the same time, the US Dollar (USD) remains subdued as the partial US government shutdown drags on and markets grow more confident that the Federal Reserve (Fed) will continue easing monetary policy.