Aussie dollar rises on hawkish RBA comments ahead of key jobs report

Daily Currency Update

The Australian dollar (AUD) advanced on Wednesday, gaining 0.40% to trade around US$0.6510 against the US dollar at the time of writing. The currency’s move higher was driven by renewed optimism around Australia’s economic outlook following hawkish commentary from the Reserve Bank of Australia (RBA). Speaking at the Citi Australia & New Zealand Investment Conference in Sydney, Sarah Hunter, Assistant Governor at the RBA, highlighted ongoing upside risks to inflation. She warned that inflation for the third quarter is likely to come in stronger than previously expected, adding that both labour market dynamics and broader economic activity could be more robust than assumed in current forecasts. “Inflation is likely to be stronger than expected in the third quarter, while labour market and economic conditions might be tighter than assumed,” Hunter noted during her remarks. Her comments signalled that the RBA is closely monitoring the risk of inflation persistence and is not ruling out the possibility of additional monetary tightening if necessary. The remarks had an immediate impact on the currency markets, lifting sentiment toward the AUD as traders reassessed the likelihood of further rate hikes. While the RBA has kept rates steady in recent months, Hunter’s tone suggested that the central bank remains alert to any data suggesting entrenched inflationary pressures. Market participants are now turning their focus to Australia’s upcoming September labour force report, due on Thursday, which could further influence expectations around the RBA’s next policy move. The report is expected to show a rebound in employment, with consensus forecasts pointing to a 17,000 increase in jobs after a 5,400 decline in August. However, the unemployment rate is projected to edge up slightly to 4.3% from 4.2%. While a modest rise in unemployment might reflect some slack re-entering the labour market, economists say this alone is unlikely to shift the RBA’s stance significantly. Analysts at ING noted that only a material deterioration in labour market conditions would raise concerns at the central bank. “For the RBA to change its tone, the data would have to show more than just a minor uptick in unemployment—we’d need to see signs of sustained weakness,” ING economists said in a note. Overall, the market remains sensitive to any indicators that could tilt the RBA’s bias more hawkish. With inflation still running above the central bank’s 2–3% target band and the labour market remaining relatively resilient, any upside surprises in economic data could revive speculation of another rate hike before year-end.