Employment Surprise Flattens Curve

• Australian labour force data came in well below expectations, with employment falling 18.6k in April (against +15k expected) and the unemployment rate rising to 4.5% (4.3% expected); a clear softening in labour market conditions.
• The weaker jobs print pushed Australian yields lower and largely removed the chance of a June RBA hike. Markets are now looking to August as the more likely decision point, with only around a 50% chance of another hike priced and just less than one full move expected by year-end.
• Longer-end Australian yields fell around 5–7bp as markets pared back the risk of multiple further hikes. While inflation remains the RBA’s main concern, the softer labour data makes an immediate follow-up move much harder to justify, as spending pressures may fade without further intervention.
• Middle East headlines remain mixed, with US Secretary of State Marco Rubio pointing to “some good signs” of a possible agreement with Iran. Clear gaps remain, particularly around Iran’s enriched uranium and plans for a resolution in the Strait of Hormuz.
• US data continues to look more resilient, with jobless claims falling last week and manufacturing activity rising to a four-year high in May. That gives the Fed more room to stay focused on inflation risks.