Whereas most currencies have been tossing and turning from uncertainty, the Australian greenback has largely been racking up positive factors throughout the board whereas the Reserve Financial institution of Australia (RBA) formally entered its tightening period.
The most recent Australian jobs report launched earlier this month simply handed RBA policymakers and Aussie bulls one more reason to really feel good.
So what’s fueling this AUD run, and extra importantly, can it preserve going? Let’s break it down.
What Occurred: The January Jobs Report
Australia’s labor market simply printed one other strong month of knowledge, and markets positively seen.
Based on the Australian Bureau of Statistics (ABS), whole employment rose by 18,000 in January 2026, slightly below the consensus of 20,000 in hiring development.
However the underlying parts inform the true story: full-time employment surged by 50,500 individuals, greater than offsetting a fall of 32,700 in part-time positions. That shift issues as a result of full-time jobs sign real confidence within the financial system: employers aren’t simply including informal staff, they’re making actual hiring commitments.
The headline unemployment fee held regular at 4.1%, beating market expectations of an increase to 4.2%. That’s not simply excellent news by itself, it’s the fourth consecutive month the place pattern unemployment has declined. The participation fee got here in at 66.7%, nonetheless elevated by historic requirements.
This report got here scorching on the heels of a giant central financial institution resolution. Simply two weeks earlier, the RBA hiked rates of interest by 25 foundation factors, taking the official money fee to three.85%. This transfer made Australia the primary main central financial institution to hike in 2026, reversing a part of the easing cycle that had introduced charges down from 4.35% in early 2025.
Why It Issues: AUD’s Excellent Storm
Right here’s the principle purpose the Aussie has been crushing it: a mixture of hawkish central financial institution coverage, resilient financial information, a weaker US greenback, and commodity worth power — all firing directly.
The RBA’s unanimous fee hike wasn’t a shock transfer. Inflation in Australia rose 3.8% year-over-year in December 2025, properly above the RBA’s 2–3% goal, and the trimmed imply (the financial institution’s most well-liked core inflation gauge) got here in at 3.4%. With personal demand rising quicker than anticipated and the labor market staying tight, the RBA had little selection however to tighten.
Add to that how commodity costs, notably base and treasured metals, have given the Aussie a agency tailwind. In any case, the Land Down Below is the world’s high iron ore exporter and gold has simply surged to turn out to be its second-largest commodity export, each of which have seen sturdy rallies in 2026.
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Key Classes for Merchants
1. The carry commerce issues, however so does course.
When a central financial institution hikes charges whereas others are reducing, it creates a compelling purpose to carry that foreign money. The RBA’s February hike put the AUD on a distinct coverage trajectory than many friends, and markets rewarded it. Larger charges appeal to yield-seeking buyers from overseas.
2. Unemployment fee vs. employment development: Learn each.
Australia’s headline job positive factors of 18,000 seemed modest. However the high quality of the roles (50,500 full-time additions) instructed a extra bullish story. All the time look beneath the headline quantity. A report that provides 50,000 part-time jobs could be very completely different from one which provides 50,000 full-time positions.
3. Labor market information shapes central financial institution expectations.
The ABS jobs report influences whether or not merchants assume the RBA will hike once more. If jobs keep sturdy and unemployment stays low, one other hike is feasible, and that would push AUD larger. If the labor market softens, the RBA probably pauses. Watch the information move, not only one report.
4. Foreign money power can appeal to its personal headwinds.
A stronger AUD makes Australian exports costlier for overseas consumers, together with China, which is Australia’s high buying and selling companion. If the Aussie rallies an excessive amount of, it dangers denting export competitiveness, which may finally sluggish development and put the brakes on the foreign money.
5. The U.S. Greenback story issues simply as a lot.
The Aussie doesn’t exist in a vacuum. Part of AUD’s 2026 run has been USD weak spot pushed by comfortable U.S. labor information, political uncertainty, and Fed fee reduce expectations. If the greenback levels a comeback, even a strong Aussie home story is probably not sufficient to maintain AUD climbing.
The Backside Line
Australia’s labor market has confirmed extra resilient than many anticipated heading into 2026. With unemployment at 4.1%, full-time job development staying wholesome, inflation operating scorching, and the RBA mountain climbing charges whereas international friends pause or reduce, the basic backdrop for the Aussie stays constructive.
Nonetheless, Australia’s subsequent quarterly CPI launch could possibly be crucial for figuring out whether or not or not the RBA hikes once more instantly. Markets at present worth a 96% chance of a maintain on the subsequent RBA assembly, however one scorching inflation print may change that rapidly. Any recent sign from Governor Michele Bullock on additional tightening may additionally transfer AUD quick.
The Aussie’s run has been spectacular, however all tendencies finally want a breather. With AUD/USD close to multi-year highs and the pair displaying indicators of near-term exhaustion, the tempo of any additional positive factors could sluggish even when the course stays up. As at all times in foreign exchange, it’s not nearly being proper on course: it’s about timing, place sizing, and defending your capital.
This text is for academic functions solely. It doesn’t represent monetary recommendation. Buying and selling includes substantial danger, and previous efficiency isn’t indicative of future outcomes. All the time do your personal analysis and think about consulting with a certified monetary advisor.
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