Insights 
VT 
Australia’s Unemployment Rate rose to 4.5% in September, up from 4.3% in August, as reported by the Australian Bureau of Statistics. This surpassed the market expectation of 4.3%.
The Employment Change increased to 14.9K in September, a growth from -11.8K in August, amidst a forecast of 17K. The participation rate also increased to 67%, compared to 66.9% previously.
Employment Changes
Full-Time Employment saw an increase of 8.7K from a previous fall of 48.6K, while Part-Time Employment went up by 6.3K, against a prior rise of 36.7K. The employment-to-population ratio held steady at 64.0 percent.
An increase in unemployment was partly due to more individuals, both male and female, seeking work. The number of unemployed males increased by 24,000 to 370,000, while females increased by 10,000 to 314,000.
The Australian Dollar (AUD) saw a decrease in value after the announcement, trading 0.45% lower against the USD on that day. Notably, the AUD weakened the most against the Swiss Franc during the week.
The Reserve Bank of Australia previously maintained the Official Cash Rate at 3.6%, amidst signs of recovering demand. Labour market data remains significant for monetary policy, which will be influenced by current employment trends.
Market Impact
The surprise jump in unemployment to 4.5%, the highest we have seen since late 2021, signals a clear softening in the Australian labor market. This unexpected weakness significantly dampens any prospect of the Reserve Bank of Australia (RBA) hiking rates further. For traders, this reinforces a bearish bias on the Australian dollar, as the odds of a future interest rate cut have now increased.
We have been watching the unemployment rate climb steadily from the lows below 4% seen back in 2023 and 2024. The RBA’s aggressive rate hikes during that period, which took the cash rate to a peak of 4.35%, were designed to cool the economy, and today’s data suggests that cooling is accelerating. The current cash rate of 3.6% already reflects an easing cycle, which this report will likely extend.
In the coming weeks, we should consider buying put options on the AUD/USD, targeting a move below the 0.6400 support level. This strategy allows us to profit from a falling Australian dollar while capping our potential losses to the premium paid. The market’s sharp reaction, pushing the AUD/USD down almost half a percent, shows that bearish sentiment is building quickly.
The data also reveals the Aussie dollar’s broad weakness, especially against safe-haven currencies like the Swiss Franc. Therefore, shorting the AUD/CHF cross could be an effective strategy, particularly with ongoing global uncertainties like the U.S. government shutdown. This trade isolates the specific weakness of the Australian economy against a currency backed by a more stable outlook.
Given the speculation that the US Federal Reserve may also cut rates, a direct bet on Australian monetary policy is another strong option. We can look at interest rate futures to position for the RBA acting on this weaker employment data. This approach focuses purely on the domestic situation, avoiding the noise from shifting US policy.
