Australia’s unemployment rate fell to 4.1% in December, down from 4.3% in November, and better than the expected 4.4%. There was an increase of 65.2K jobs, bouncing back from a loss of 28.7K jobs in November, surpassing the forecast of 30K. The participation rate slightly increased to 66.7% from 66.6% in November. Full-time jobs rose by 54.8K following a drop of 65.3K, while part-time jobs added 10.4K in December, lower than the previous month’s increase of 36.6K.

Factors Behind Employment Growth

More jobs for those aged 15-24 played a key role in these changes. Male employment rose by 49,000, while female employment increased by 17,000. Total hours worked went up by 0.4%, matching the growth in jobs. After this employment news, the Australian Dollar strengthened, with the AUD/USD rising 0.40% to 0.6788. The AUD gained the most against the Japanese Yen. The Reserve Bank of Australia is set to meet on February 3 to discuss monetary policy for the year. Although employment data was mixed, it hints at some easing for the RBA, keeping in mind the ongoing inflation concerns. Australian employment statistics are closely monitored as they affect currency values and can influence central bank decisions.

Economic Impact and Market Reaction

The December 2025 employment report has significantly changed the economic outlook. The unemployment rate dropped to 4.1%, and job growth surpassed expectations, contradicting earlier beliefs that the labor market was cooling. This unexpected strength indicates the Australian economy might be more robust as we approach 2026. This report puts pressure on the Reserve Bank of Australia ahead of its meeting on February 3rd. With inflation at 3.4% in November 2025, the strong employment figures complicate any consideration for rate cuts by the RBA. Currently, there’s a 45% chance of a rate hike at the upcoming meeting, a sharp increase from just 15% before the report. For traders, this indicates it’s time to prepare for a stronger Australian Dollar. We might look at buying AUD/USD call options with strike prices above the present resistance of 0.6830, aiming for a move towards 0.6870. This strategy offers a manageable risk while capitalizing on potential gains ahead of the RBA decision. The case for a stronger AUD is also backed by external factors. Iron ore prices, a vital Australian export, have climbed over 5% in the last month to more than $140 per tonne. This historical trend supports a stronger AUD, aided by recent data showing unexpected growth in China’s manufacturing sector in early January. The last crucial element will be the Q4 2025 inflation report, due on January 28. If this report also shows high inflation, it will likely prompt the RBA to act, reinforcing the argument for a more aggressive stance. We will closely monitor this release as key support for our positive outlook on the Aussie dollar. Create your live VT Markets account and start trading now.

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