SYDNEY: The Australian and New Zealand dollars jumped on Thursday while bond yields tumbled as markets priced in ever-more aggressive rate cuts in the United States, and at home.

A surprisingly strong Australian jobs report gave the Aussie an extra fillip, taking it to the highest in almost five months at $0.6708. It had already risen 1.5% overnight after the US Federal Reserve gave a dovish outlook on policy.

“The scale of the Fed surprise to rates markets suggests reverberations for the USD will continue in coming days,” said Westpac FX analyst Sean Callow. “This should be enough to see AUD finally break resistance at $0.6723 and $0.6739.”

The kiwi dollar hit its highest since July at $0.6223 , having climbed 0.6% overnight, though it was slowed somewhat by a very weak report on the domestic economy.

Bonds rallied hard as markets moved to price in lower rates across the globe, with futures now implying no chance of a hike in either Australia or New Zealand despite their central banks having tightening biases.

The upbeat jobs report proved no hindrance to the rally as the strength in employment was being met by an even bigger rise in the supply of labour, suggesting there was little threat of a wage-price spiral.

As a result, markets now implied a 70% chance the Reserve Bank of Australia (RBA) would cut rates by May, while a quarter point easing to 4.10% was fully priced for June. Futures now imply a bit more than 50 basis points of easing for all of 2024, though that pales compared with the 153 basis points priced in for the Fed. Australian three-year yields were down a steep 20 basis points at 3.75%, lows not seen since early September and well under the 4.35% cash rate.