The Australian Dollar rose against the US Dollar after a two-day pullback. AUD/USD was up 0.2% to around 0.7090 in European trading on Monday. Markets are waiting for the Reserve Bank of Australia (RBA) minutes on Tuesday. At its previous meeting, the RBA raised the Official Cash Rate by 25 basis points to 3.85%.

Australian Jobs Data In Focus

Australian jobs data for January is due on Wednesday. Forecasts point to 20K new jobs, down from 65.2K in December. The Unemployment Rate is expected at 4.2%, up from 4.1%. In the US, trading was quieter because of President’s Day. The US Dollar Index was slightly higher, near 97.00. Attention also turns to the Federal Open Market Committee (FOMC) minutes from the January meeting, due on Wednesday. Central banks aim to keep prices stable and often target inflation near 2%. They mostly use interest rates. They raise rates to tighten policy and cut them to loosen policy. Policy boards, led by a chair or president, make these decisions. Public communication is also limited during the blackout period.

Central Bank Expectations Shift

In February 2025, markets expected the RBA to stay hawkish. That helped keep the Aussie dollar supported near 0.7100 against the US dollar. Today, the picture is very different. AUD/USD is trading much lower, closer to 0.6600. This shows how central bank expectations have shifted over the past year. A year ago, the RBA cash rate was 3.85%, and Governor Bullock signaled more hikes were possible. Now the cash rate is lower, at 3.60%, after cuts in late 2025. Meanwhile, the US Federal Reserve rate is 4.00%. This gap in rates now makes holding US dollars more attractive than holding Australian dollars, compared with a year ago. Australia’s labor market also looks weaker. In February 2025, markets were looking for a solid gain of 20,000 jobs. But the latest data for January 2026 showed a smaller increase of only 12,000. The unemployment rate has also risen from 4.2% a year ago to 4.5% now. This reduces the need for the RBA to consider rate hikes. Meanwhile, the US Dollar Index (DXY) was steady around 97.00 in February 2025. Today, it is much stronger, trading near 104.50. The US economy has held up better than many other developed economies. This strength in the greenback is a major headwind for AUD/USD. Given this backdrop, we think the Aussie dollar has limited upside in the coming weeks. Derivatives traders may consider strategies that benefit if AUD/USD stays in a range or drifts slightly lower, such as selling call spreads. Implied volatility is also lower than it was during the 2025 hiking cycle, which makes options strategies cheaper to put on. The upcoming RBA minutes and the quarterly inflation report will be key for any sign the central bank is shifting away from its neutral stance. Stronger-than-expected Australian data could still trigger a short-term rally, but the broader trend looks capped. For now, we prefer selling into strength rather than chasing rallies. Create your live VT Markets account and start trading now.

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