The Australian Dollar strengthened significantly, reaching a sixteen-month high against the US Dollar. This surge was fueled by easing US-Europe tensions improving risk sentiment and, crucially, a surprisingly strong Australian jobs report that significantly increased market expectations for an imminent interest rate hike by the Reserve Bank of Australia.
- The Australian Dollar strengthened to around $0.679, approaching a sixteen-month high.
- Australian employment surged by 65,200 in December, exceeding forecasts.
- The Australian unemployment rate unexpectedly fell to a seven-month low of 4.1%.
- Market odds for a 25bp rate hike at the RBA’s February 3 meeting jumped to 54%.
- A rate hike is now fully priced in by May.
- Attention now turns to next week’s December-quarter CPI data.
- AUD/USD pair extends its winning streak for the fourth trading day.
The robust employment data and easing global tensions provide a strong tailwind for the Australian Dollar. The improved job market strengthens the case for the central bank to tighten monetary policy sooner rather than later, making the currency more attractive to investors seeking higher yields. Future inflation data will be crucial in solidifying expectations for rate hikes and further supporting the value of the Australian Dollar.