The Australian Dollar (AUD) weakened against the US Dollar (USD), with the AUD/USD pair trading near 0.7080 during Asian trading hours on Friday, following the release of Australian employment data showing a rise in the unemployment rate for February. According to the Australian Bureau of Statistics, the unemployment rate increased to 4.3% in February from 4.1% in January, surpassing the market consensus of 4.1% [1]. This softer employment data led to a cooling of expectations for interest rate hikes from the Reserve Bank of Australia (RBA), as money markets lowered the probability of a May 2026 rate hike from 61% to 57% [1].
Meanwhile, the People's Bank of China (PBOC) announced on Friday that it would leave its benchmark Loan Prime Rates (LPRs) unchanged, with the one-year LPR at 3.00% and the five-year LPR at 3.50% [1][2]. The market reaction to the PBOC's decision was muted, with the AUD/USD trading 0.08% lower on the day at 0.7081 at the time of writing [2].
The Federal Reserve (Fed) also held its interest rates steady at a target range of 3.50% to 3.75% following its March meeting. The Fed's median "dot plot" projection suggested one 25-basis-point rate cut later in 2026, though some officials now expect no cuts at all this year. Fed Chair Jerome Powell noted that the ongoing war in Iran has created an "energy shock" and heightened uncertainty, complicating the path for future policy [1].
The combination of rising unemployment in Australia and unchanged rates from the PBOC contributed to the AUD's weakness. The employment data in Australia has reduced the likelihood of imminent rate hikes by the RBA, which is typically negative for the currency. The PBOC's decision to maintain rates signals stability in Chinese monetary policy, but did not provide any positive momentum for the AUD [1][2].
CONCLUSION
The Australian Dollar declined following higher-than-expected unemployment data and unchanged rates from the PBOC, reflecting a cautious market outlook. Reduced expectations for RBA rate hikes and muted reaction to Chinese monetary policy contributed to the AUD's weakness. Investors are likely to remain attentive to further economic data and central bank signals for future direction.