Strong labor market supports Australian currency ahead of RBA meeting

Last month, Australia saw an increase in the employment rate to 89,000 at the same time as the unemployment remained at the current level of 4.1%. According to Bloomberg, the statistics could change expectations for the Reserve Bank of Australia's (RBA) monetary policy.

These changes had a positive influence on the Australian currency and at the same time caused an increase in yields on three-year government bonds. The latter, in turn, reached the maximum level for the last 6 weeks. This happened due to the decrease in investors' forecasts regarding the reduction of interest rate by the country's financial regulator.

As stated by Damien McColough, head of fixed income at Westpac Banking Corp, such changes are positive for the economy and cast doubt on the country's future monetary policy shifts.

Earlier, after the Donald Trump administration imposed tariffs, market participants' expectations for the interest rate were unfavorable in terms of the currency's strength. Many predicted five rate cuts and did not rule out a possibility of the sixth cut.