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Aussie Jobs Stir U.S. Treasuries, Global Rate Cuts Loom

Australian jobs data triggers global easing expectations, influencing U.S. Treasuries and setting stage for RBA rate cuts by April 2025.

By Max Weldon

5/15, 22:33 EDT
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Key Takeaway

  • Australian jobs report triggers anticipation of RBA easing, influencing U.S. Treasury markets with a rate cut expected by April 2025.
  • Global financial markets adjust to easing policies, with ECB leading and Fed expected to cut rates twice within the year.
  • Positive reaction in Treasury and global bond markets as demand surges, reflecting a shift towards more accommodative monetary policies worldwide.

Surprising Jobs Data Influences Markets

Australia's recent jobs report, which came in softer than expected, has led traders in Australia to anticipate the beginning of a Reserve Bank of Australia (RBA) easing cycle sooner than previously thought. This shift in expectations has also impacted the U.S. Treasury market, making Australian economic data an unusual but significant driver of global financial sentiment. The market is now pricing in a high likelihood of an RBA rate cut by December, with a full cut expected by April 2025. This development is part of a broader trend where global financial markets are adjusting to the prospect of policy easing across major economies.

Global Easing Path Gains Clarity

The anticipation of policy easing is not limited to Australia. With Federal Reserve speakers moving away from discussions of rate hikes and suggesting that rates could remain higher for a period "until September at the latest," the global financial landscape is tilting towards easing. The European Central Bank (ECB) is expected to lead the charge with a rate cut in the coming weeks, marking the first such move by a major central bank in this cycle. Additionally, markets have priced in two rate reductions by the Federal Reserve within the year, signaling a brighter outlook for global bonds.

Treasury and Bond Markets React

The reaction to the Australian jobs data and the shifting policy expectations has been notably positive for the Treasury and global bond markets. The prospect of rate cuts by the RBA, alongside adjustments in policy by other major central banks, has bolstered the demand for Treasuries. This demand surge is reflective of a broader rally in global bonds, driven by the increasing certainty of a more accommodative monetary policy stance across key economies. The interconnectedness of global financial markets means that economic indicators from one country can have far-reaching effects, influencing investor sentiment and policy expectations worldwide.