Australia’s labour market remains firm, with unemployment at 4.1% and 17,800 new jobs added, which supports the Reserve Bank of Australia’s recent rate rise.
Wage growth remains weak, and low unemployment has not translated into faster pay rises. Trimmed mean inflation in the past quarter was 3.4% year-on-year, leaving real wage growth in Q4 2025 at 0.
Outlook For RBA Policy And The Aussie Dollar
Commerzbank expects only one more interest rate increase from the central bank. It states that current market pricing is too optimistic and may cap further gains in the Australian dollar in the coming months.
The Australian labor market appears very robust, which seems to support the Aussie dollar. Looking back at the data from late 2025, we saw unemployment hold at a historically low 4.1% while the economy continued to add a solid number of jobs. This strength has kept expectations for further rate hikes from the Reserve Bank of Australia elevated.
However, we remain cautious because this low unemployment is not leading to strong wage growth. The data from last quarter showed that wage growth was 3.4%, exactly the same as trimmed mean inflation. This means real wage growth for Australians was zero, which is not a figure that will spark new inflationary pressures.
From our perspective, this means the central bank will likely only raise interest rates one more time. Current interest rate swap markets, however, are pricing in at least two more hikes by the end of 2026, which seems overly optimistic. This disconnect suggests the Australian dollar’s potential to rise further is limited in the coming months.
Derivatives Positioning Ideas
For derivatives traders, this situation implies that rallies in the AUD/USD may not last. Selling call options or establishing short positions on bounces toward the 0.6800 level could be a viable strategy. Buying AUD puts with a strike price below 0.6600 offers a way to position for a downturn should the market begin to correct its optimistic rate forecasts.
