In July 2025, Australia added 60,500 full-time jobs, keeping the unemployment rate steady at 4.2%, as expected. However, part-time jobs dropped by 36,000. Wage data showed a 0.8% increase in the Wage Price Index from one quarter to the next, which also matched predictions. This stability in wages, coupled with recent job reports, paints a clearer picture of the labor market’s strength.

The Impact of Employment and Wage Reports

The reports on jobs and wages suggest that the Reserve Bank of Australia (RBA) might slow down its rate cuts. The RBA has carefully considered its decisions on interest rates, and the new data aligns with their earlier assessments. This might lead to a cautious approach regarding future rate cuts. Following this positive jobs report, the Australian dollar has gained strength, highlighting a resilient economy. We see value in purchasing near-term call options on the AUD/USD, anticipating further gains as the market reduces expectations for immediate rate cuts. This outlook is supported by the strong rise in full-time employment, a crucial indicator for the RBA. This situation is reminiscent of late 2023 when stronger inflation and job data delayed the RBA’s rate cuts. During that time, the AUD/USD rose over 7% from October to December as rate cut expectations faded. We predict a similar, though possibly more moderate, increase in the currency through September 2025.

The RBA’s Future Decisions

The current jobs and wage data suggest the RBA will keep the cash rate at 4.35% longer than expected. This scenario makes shorting Australian 3-year government bond futures an appealing option in the coming weeks. With rate cut expectations for the fourth quarter decreasing, we foresee bond yields rising, which will drive down the price of these futures. The RBA has noted that its decisions are “finely balanced,” leading to uncertainty about future policy changes. Because of this, we believe implied volatility on the Australian dollar is undervalued, as options markets have not fully adjusted to this hawkish data. Buying straddles on the AUD/USD could be beneficial, as they profit from significant price movements around the next RBA meeting, no matter which direction the market takes. Currently, overnight index swaps (OIS) suggest a 40% chance of a 25-basis-point cut by the RBA’s November 2025 meeting. However, we think the new employment data will lower that probability to below 20% in the upcoming trading sessions. This adjustment will support our outlook for a stronger dollar and higher front-end yields. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now