Market Briefing: Jobs blitz propels AUD higher
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Positive sentiment. US equities extended their rebound. USD softer. AUD at levels last traded in Q4 '24 after jobs report boosted RBA rate hike bets.
Data flow. Higher NZ CPI also supported the NZD. BoJ meets today. Global PMIs due. US Fed meets next week. AU CPI also out on Wednesday.
Global Trends
The upbeat vibes stemming from President Trump’s announcement of a 'framework for a future deal' on Greenland continued overnight. Details of the agreement remain sketchy, with ‘glass half full’ markets choosing to focus more on the de-escalation of US-EU tensions. European equities rose (EuroStoxx600 +1%) with the US S&P500 extending its rebound (+0.6%). Bond market volatility has eased with the benchmark US 10-yr rate trading in a tight 4.23-4.27% range. Across commodities, iron ore is ~1.5% higher (now ~US104/tn), while WTI crude oil dipped down towards US$59/brl. In FX, the USD index lost altitude with EUR edging up to ~$1.1750 and GBP rising to just under ~$1.35. Ahead of today’s Bank of Japan decision (no set time) USD/JPY consolidated (now ~158.44). The NZD strengthened (now ~$0.5925, a ~4-month high) with stronger NZ inflation this morning giving it more of a kick along. The AUD outperformed after the latest Australian jobs data blitzed expectations, bolstering the case for a RBA rate hike as soon as next month. At ~$0.6838 the AUD is around its highest since October 2024.
Offshore, there was nothing released overnight which moved the central bank expectations dial. The US PCE deflator (the Fed’s preferred inflation gauge) showed ‘core’ price pressures are hovering at ~2.7-2.8%pa. US personal spending was solid over October/November, however the moderation in income growth suggests consumers might tighten their belts down the line if savings aren’t available to be drawn upon. Headwinds for the US economy remain in place, in our view, with the impact from tariffs/higher import costs and lingering policy uncertainty likely to build over coming quarters.
Today, no change in policy is expected by the BoJ after its December rate rise. Rather focus will be on updated economic projections which can give a guide to what policymakers think might be the path ahead. Also out today are the global business PMIs for January (Eurozone 8pm AEDT, US 1:45am AEDT). On balance, we remain of the opinion that near-term rebounds in the USD shouldn’t be long-lasting or overly large. The overvalued USD is facing longer-term headwinds such as the US’ sizeable ‘twin deficits’, shaky investor confidence that may reduce capital inflows, patchy growth, and lower US interest rates.
Global event radar: BoJ (Today), Global PMIs (Today), US Fed (29 Jan), China PMIs (31 Jan), RBA (3 Feb), US ISM (3 Feb), EZ CPI (4 Feb), BoE (5 Feb), ECB (6 Feb), US Jobs (7 Feb)
Trans-Tasman Zone
The mix of positive market sentiment and domestic economic news has supported the NZD and AUD. At ~$0.5925 the NZD is up at a multi-month high and above its 1-year average. Q4 2025 NZ CPI data released this morning was stronger than the market and RBNZ expected. NZ headline inflation reaccelerated to 3.1%pa, well north of the RBNZ 2.7% forecast. The data supports our assessment that the RBNZ’s easing cycle has ended and that rate hikes could start to be seriously considered later this year. In NZ, cyclical indicators for household spending and housing appear to be turning the corner. In time this should feed into the jobs market, which itself can generate positive feedback loops across the NZ economy. We believe this should be a relative tailwind for the NZD over time. As mentioned before the NZD has tended to strengthen between the last RBNZ rate cut and first rate rise.
In Australia, the monthly jobs data for December was much stronger than predicted. This has propelled the AUD (now ~$0.6838) to its highest level since October 2024. The AUD has also continued its positive run on the cross-rates with gains of ~0.6-1.2% recorded against the EUR, JPY, GBP, CAD, and CNH over the past 24hrs. In level terms AUD/EUR (now ~0.5820) is at its highest since last April, AUD/JPY (now ~108.34) is approaching its cyclical peak, AUD/GBP (now ~0.5067) is around an ~11-month high, and AUD/CNH (now ~4.7623) is at the top of its ~14-month range.
In terms of the data, Australian employment rebounded strongly (+65,200) with the bulk of jobs full-time, and unemployment fell to 4.1% (a low since last May). Things are running better than the RBA was anticipating (the RBA had penciled in a year-end unemployment rate of ~4.4%). The broad set of “full employment” indicators the RBA monitors shows conditions remain tighter than average. This makes it hard for inflation to slow to where it needs to be. Job market trends reinforce the case for the RBA to recalibrate policy settings higher as soon as 3 February. Markets now view this as a ~60% chance, with 2 rate hikes fully discounted by November. Q4 CPI inflation data is due next week (28 January). There will be bursts of volatility along the way, but over coming months we continue to see the AUD grinding higher (and up towards ~$0.70 later this year) with more favourable yield spreads between Australia and others such as the US a factor, as is a weaker USD, and prospect of more stimulus out of China.
AUD & NZD event radar: BoJ (Today), Global PMIs (Today), AU CPI (28 Jan), US Fed (29 Jan), China PMIs (31 Jan), RBA (3 Feb), US ISM (3 Feb), NZ Jobs (4 Feb), EZ CPI (4 Feb), BoE (5 Feb), ECB (6 Feb), US Jobs (7 Feb)
AUD levels to watch (support / resistance): 0.6720, 0.6780 / 0.6880, 0.6940
NZD levels to watch (support / resistance): 0.5830, 0.5870 / 0.5930, 0.5970
Market Moves
Peter Dragicevich
Currency Strategist - APAC
Upcoming Events
FRIDAY (23rd January)
JPY Bank of Japan (no set time)
JPY CPI Inflation (Dec) (10:30am)
JPY PMIs (Jan P) (11:30am)
SGD CPI Inflation (Dec) (4pm)
JPY BoJ Gov. Ueda Speaks (5:30pm)
GBP Retail Sales (Dec) (6pm)
EUR France PMIs (Jan P) (7:15pm)
EUR Germany PMIs (Jan P) (7:30pm)
EUR PMIs (Jan P) (8pm)
GBP PMIs (Jan P) (8:30pm)
GBP BoE’s Greene Speaks (8:30pm)
EUR ECB Pres. Lagarde Speaks (9pm)
SATURDAY (24th January)
CAD Retail Sales (Nov) (12:30am)
USD PMIs (Jan P) (1:45am)
*Note, all times/dates provided are AEDT
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