Aussie Edges Higher on Strong Jobs Data

The Australian dollar edged up to around $0.704 on Thursday, after losing more than 1% in the previous session, as investors assessed the latest jobs report. Data showed employment surged by 48,900 in February, well above the forecasted 20,000 gain, underscoring continued labor market resilience. However, the unemployment rate unexpectedly climbed to 4.3%, pointing to a more mixed picture. Still, the rate remains historically low and reinforced the Reserve Bank’s view that the economy can withstand tighter policy. Although they did little to shift rate expectations, with markets still divided on whether another hike could come as soon as May. Meanwhile, the central bank warned that the escalating Middle East war poses material risk to the domestic economy and signaled a more severe global shock, with persistently high inflation likely to add pressure on some households and borrowers. But they also emphasized that Australia’s financial system remains broadly resilient.

The Australian dollar held above $0.701, marching back toward multi-year highs, supported by a hawkish tone from the Reserve Bank after a narrow back-to-back rate hike. The surprise 5–4 split decision underscored a debate over timing rather than direction, with Governor Michele Bullock warning inflation risks remain and signaling policy may not yet be restrictive enough. Markets subsequently raised expectations for another hike as soon as May, with further tightening still priced in by August. Attention now turns to the upcoming jobs report this week and flash PMI figures next week for further clues on the policy outlook and the country’s economic health. Elsewhere, the ongoing Middle East conflict remained in focus, as Iran intensified attacks on energy infrastructures in the region, while US allies pushed back against President Donald Trump’s call to secure shipping through the Strait of Hormuz.

The Australian dollar strengthened toward $0.71 on Tuesday, extending gains from the previous session, as the Reserve Bank of Australia delivered its first back-to-back interest rate hikes since mid-2023. The central bank raised the cash rate to 4.1%, marking a second consecutive month of hike and reversing two of last year’s cuts. The move underscores the RBA’s ongoing struggle to rein in persistent inflation, which has been fueled by rising energy costs amid escalating tensions in the Middle East. Markets also expect another rate hike in May, which could lift the cash rate to 4.35% and fully reverse the 75 basis points of cuts enacted during last year’s six-month easing cycle. Investors will be closely watching RBA Governor Michele Bullock’s post-meeting press conference for hints on the bank’s future policy direction. Attention will then turn to Thursday’s labor market data, which investors will scrutinize after Governor Bullock recently noted that it remains tight.