Australia dollar slips as jobs shock rekindles calls for rate cut

SYDNEY, Oct 16 (Reuters) - The Australian dollar slipped on Thursday when data showed unemployment jumping to a near four-year high as jobs growth continued to slow sharply, a shock result that rekindled pressure for a near-term rate cut.

The Aussie fell 0.3% to $0.6489 AUD=D3 after the government reported unemployment spiked to 4.5% in September, the highest reading since late 2021 and above forecasts of 4.3%.

Employment missed forecasts with a rise of 14,900, dragging annual jobs growth down to a pedestrian 1.3% compared to a rapid 3.5% at the start of the year.

The dismal result contrasted markedly with the Reserve Bank of Australia's recent assessment that the labour market was "stable", and with the central bank's forecast that unemployment would peak at 4.3%.

Investors quickly responded by boosting the chance of a November cut in the 3.65% cash rate to 76%, from under 50% before the data. Futures also sharply narrowed the odds on rates falling to an eventual floor of 3.10%. 0#AUDIRPR

Abhijit Surya, a senior APAC economist at Capital Economics, cautioned that the jobs data had shown spikes in unemployment before only for them to reverse the following month.

"On balance, our sense is that today's soft jobs will bring the RBA a bit closer to cutting rates by 25bp at its meeting in November," he said.

"However, given the Bank's ongoing concerns about the stickiness of inflation, an upside surprise in the Q3 CPI data due at the end of the month could still tilt the scales in favour of a hold."

Earlier in the session, RBA Governor Michele Bullock had described the labour market as still a little tight and said the board was considering whether there will be more easing or not.

Consumer price figures for the third quarter are due at the end of October, and analysts assume a rise of 0.9% or more in core inflation would still make the RBA reluctant to ease.

Bond markets took the jobs data at face value and rallied hard, with two-year futures TYc1 jumping 10 ticks to 96.625. Ten-year bond yields fell 7 basis points to 4.161% AU10YT=RR, and touched their lowest since early July.

The drop gave the New Zealand dollar a rare 0.4% bounce on the Aussie to A$0.8819 NZDAUD=R. The kiwi also added 0.3% on its U.S. counterpart to $0.5733 NZD=D3, though that was still close to Monday's six-month trough of $0.5684.