The Australian dollar has slumped and the money markets are calling a 98 per cent chance of a rate cut after new data revealed a shock fall in the employment rate.

The unemployment rate rose to 4.3 per cent last month, beating market expectations of 4.1 per cent, according to the Australian Bureau of Statistics.

Employment as a whole rose by 2000 people this month, following a fall of 1000 in May, and is up 2 per cent year on year.

The rise in unemployment was determined as 33,600 workers became unemployed in June.

This was against expectations of 20,000 jobs to be added in the month and the unemployment rate to hold.

Markets immediately jumped on the news, with investors now banking on a future rate cut.

With expectations of lower rates, the Australian dollar slumped back below 65 US cents, while Australia’s sharemarket jumped on the news.

AMP economist My Bui told NewsWire said fall in the Australian dollar follows the market pricing in a more definite rate cut by the RBA.

“The futures market pricing for the August meeting is calling a 98 per cent chance of a rate cut,” she said.

“We continue to see the jobs market as being weaker than the (figures suggests).

“Yes the unemployment rate seems quite low but this month we’ve seen weakening in multiple measures, including leading indicators in the job market which I think the RBA will pay attention to.”

Ms Bui said Thursday’s numbers only add to the argument for more mortgage relief in the current cycle.

“We still see four more rate cuts in the cycle which hasn’t changed with today’s unemployment data but today’s data adds another strong argument for the RBA to move so I think it’s quite justified that the markets should move with the heightened probability of a rate move,” she said.

IG market analyst Tony Sycamore said the bond market was quick to react to Thursday’s data, moving up expectations of a rate cut from 80 to nearly 100 per cent in August.

“Today’s rise in the unemployment rate pushes it above the RBA’s forecast of 4.2 per cent for June 2025 and meets the 4.3 per cent rate the RBA expected by year-end,” he said.

“Combined with last month’s fall in employment, there are clear signs of deceleration emerging in the labour market.

“This calls into question the RBA’s decision to prioritise inflation over growth and jobs at its board meeting earlier this month.”

Betashare chief economist David Bassanese, who called a hold in July, said Thursday’s unemployment data was a “slam dunk” for an August rate cut.

“We’ll need more consistent signs of weakness in both employment and hiring indicators before we can conclude the labour market is turning,” he wrote in an economic note.