Australia’s unemployment rate increased from a revised 4.3% to 4.5% in September, diverging from the 4.3% consensus. Employment data for August experienced a downward revision to -12,000, with a 15,000 gain reported for September, resulting in a flat hiring trend over two months.

This rise in unemployment is attributed largely to a higher participation rate, suggesting no major deterioration in labour conditions. The Reserve Bank of Australia (RBA) might not cut rates at the 4 November meeting, as inflation figures for the third quarter will play a determining role.

Recent Inflation Data

Two months of inflation data exceeded expectations, suggesting the RBA might delay any rate cuts until December, although trade news remains a significant market influence. The Australian dollar (AUD) could reach a target of 0.68 against the USD, with trade developments driving market movements.

The recent unemployment figures, showing a jump to 4.5%, have put the Australian dollar under some pressure, but we do not believe this guarantees a rate cut next month. This data simply raises the stakes for the upcoming third-quarter inflation numbers, which are due on October 29th. That release will be the deciding factor for the Reserve Bank of Australia’s November 4th meeting.

Inflation has been a persistent issue throughout 2025, with the monthly CPI indicator frequently surprising to the upside and holding above the RBA’s 2-3% target band. We saw this pattern clearly in the second quarter, where non-tradable inflation remained particularly sticky, a trend that has likely continued. If the quarterly figure on October 29th comes in hot, the central bank will have little choice but to delay any rate cut until at least December.

Market Strategies

For derivatives traders, this sets up a clear event-driven play around the inflation data. We see value in using options on Australian interest rate futures to position for a spike in volatility. A strategy like a straddle could be effective, as it would profit from a sharp move in either direction once the market gets a definitive signal on the RBA’s next move.

In the foreign exchange market, this uncertainty can be traded using AUD/USD options. If you expect a high inflation print and no RBA cut, AUD call options could perform well as the currency rallies on relief towards the 0.6800 level. Conversely, a surprisingly soft inflation number would make a November cut a near certainty, likely sending the Aussie dollar lower and making put options profitable.

We must also watch external factors, as trade news will remain a significant driver. Data released in early October 2025 showed that demand for Australian iron ore from China has softened slightly, a trend that could weigh on the Aussie dollar regardless of the RBA’s actions. This provides a bearish backdrop that could cap any potential rallies in the currency.

Historically, the RBA has shown a preference for acting cautiously, as we saw during the easing cycle of 2019 when they waited for clear signs of economic weakness before cutting rates. This past behaviour reinforces our view that the bank will likely hold steady in November if inflation is anything but decisively weak. A December cut remains our baseline assumption, and trading strategies should be structured around that probability.

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