While most currencies have been tossing and turning from uncertainty, the Australian dollar has mostly been racking up gains across the board while the Reserve Bank of Australia (RBA) officially entered its tightening era.
The latest Australian jobs report released earlier this month just handed RBA policymakers and Aussie bulls another reason to feel good.
So what’s fueling this AUD run, and more importantly, can it keep going? Let’s break it down.
What Happened: The January Jobs Report
Australia’s labor market just printed another solid month of data, and markets definitely noticed.
According to the Australian Bureau of Statistics (ABS), total employment rose by 18,000 in January 2026, slightly under the consensus of 20,000 in hiring growth.
But the underlying components tell the real story: full-time employment surged by 50,500 people, more than offsetting a fall of 32,700 in part-time positions. That shift matters because full-time jobs signal genuine confidence in the economy: employers aren’t just adding casual workers, they’re making real hiring commitments.
The headline unemployment rate held steady at 4.1%, beating market expectations of a rise to 4.2%. That’s not just good news on its own, it’s the fourth consecutive month where trend unemployment has declined. The participation rate came in at 66.7%, still elevated by historical standards.
This report came hot on the heels of a big central bank decision. Just two weeks earlier, the RBA hiked interest rates by 25 basis points, taking the official cash rate to 3.85%. This move made Australia the first major central bank to hike in 2026, reversing part of the easing cycle that had brought rates down from 4.35% in early 2025.
Why It Matters: AUD’s Perfect Storm
Here’s the main reason the Aussie has been crushing it: a combination of hawkish central bank policy, resilient economic data, a weaker US dollar, and commodity price strength — all firing at once.
The RBA’s unanimous rate hike wasn’t a surprise move. Inflation in Australia rose 3.8% year-over-year in December 2025, well above the RBA’s 2–3% target, and the trimmed mean (the bank’s preferred core inflation gauge) came in at 3.4%. With private demand growing faster than expected and the labor market staying tight, the RBA had little choice but to tighten.
Add to that how commodity prices, particularly base and precious metals, have given the Aussie a firm tailwind. After all, the Land Down Under is the world’s top iron ore exporter and gold has just surged to become its second-largest commodity export, both of which have seen strong rallies in 2026.
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Key Lessons for Traders
1. The carry trade matters, but so does direction.
When a central bank hikes rates while others are cutting, it creates a compelling reason to hold that currency. The RBA’s February hike put the AUD on a different policy trajectory than many peers, and markets rewarded it. Higher rates attract yield-seeking investors from abroad.
2. Unemployment rate vs. employment growth: Read both.
Australia’s headline job gains of 18,000 looked modest. But the quality of the jobs (50,500 full-time additions) told a more bullish story. Always look beneath the headline number. A report that adds 50,000 part-time jobs is very different from one that adds 50,000 full-time positions.
3. Labor market data shapes central bank expectations.
The ABS jobs report influences whether traders think the RBA will hike again. If jobs stay strong and unemployment stays low, another hike is possible, and that could push AUD higher. If the labor market softens, the RBA likely pauses. Watch the data flow, not just one report.
4. Currency strength can attract its own headwinds.
A stronger AUD makes Australian exports more expensive for foreign buyers, including China, which is Australia’s top trading partner. If the Aussie rallies too much, it risks denting export competitiveness, which could eventually slow growth and put the brakes on the currency.
5. The U.S. Dollar story matters just as much.
The Aussie doesn’t exist in a vacuum. A part of AUD’s 2026 run has been USD weakness driven by soft U.S. labor data, political uncertainty, and Fed rate cut expectations. If the dollar stages a comeback, even a solid Aussie domestic story may not be enough to keep AUD climbing.
The Bottom Line
Australia’s labor market has proven more resilient than many expected heading into 2026. With unemployment at 4.1%, full-time job growth staying healthy, inflation running hot, and the RBA hiking rates while global peers pause or cut, the fundamental backdrop for the Aussie remains constructive.
Still, Australia’s next quarterly CPI release could be critical for determining whether or not the RBA hikes again immediately. Markets currently price a 96% probability of a hold at the next RBA meeting, but one hot inflation print could change that quickly. Any fresh signal from Governor Michele Bullock on further tightening could also move AUD fast.
The Aussie’s run has been impressive, but all trends eventually need a breather. With AUD/USD near multi-year highs and the pair showing signs of near-term exhaustion, the pace of any further gains may slow even if the direction stays up. As always in forex, it’s not just about being right on direction: it’s about timing, position sizing, and protecting your capital.
This article is for educational purposes only. It does not constitute financial advice. Trading involves substantial risk, and past performance is not indicative of future results. Always do your own research and consider consulting with a qualified financial advisor.
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