The Australian Dollar has gained strength, with AUD/USD rising above 0.6800 after a strong jobs report for December. Australia’s economy added 65,200 jobs, bringing unemployment down to 4.1%, down from 4.3%. This figure exceeded the Reserve Bank of Australia’s (RBA) forecast of 4.4%. Full-time positions increased by 54,800, and part-time roles grew by 10,400. A slight uptick in the participation rate to 66.7% and a 0.4% monthly increase in hours worked indicate a tighter job market. The chances of a 25 basis points interest rate hike by the RBA have now risen to 60% before their meeting in February.

Potential February Rate Hike

The likelihood of a rate increase in February could be further supported if the upcoming December CPI data shows trimmed mean inflation higher than the RBA’s year-on-year target of 3.2%. This could push the Australian Dollar even higher. Last year’s strong December jobs report prompted a surge in rate hike expectations and pushed AUD/USD above 0.6800. That report showed 65,200 jobs added and unemployment dropping sharply to 4.1%, signaling a tightening labor market that caught many off guard. In early 2026, the situation is quite different, suggesting a need for caution. December 2025’s labor data showed the unemployment rate ticked up to 4.3%. Additionally, the Q4 2025 CPI data revealed trimmed mean inflation fell to 2.9%, placing it within the RBA’s target range, easing the need for further hikes.

United States Job Market

In contrast, the United States’ latest Non-Farm Payrolls report from January 2026 showed over 210,000 jobs added in December, beating expectations. This ongoing strength keeps the Federal Reserve in a more hawkish position than the RBA, making this policy gap a key factor influencing the currency pair. Given these conditions, we recommend considering buying AUD/USD put options to prepare for a potential drop toward the 0.6500 level in the next month or two. A bear put spread could be an effective way to lower initial costs while managing risk, allowing traders to take advantage of the geopolitical tensions created by differing central bank policies. Implied volatility remains high due to this policy uncertainty, making selling options riskier. The futures market is now pricing in less than a 15% chance of an RBA rate hike by mid-year, a significant drop from the 60% probability observed following last January’s jobs report. This shift shows that market attention has moved from RBA rate hikes to the timing of potential cuts later in the year. Create your live VT Markets account and start trading now.

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