By Wayne Cole
SYDNEY, Jan 22 (Reuters) – The Australian dollar hit 15-month highs on Thursday as an apparent easing in U.S.-European tensions soothed risk sentiment, while a strong set of domestic jobs data narrowed the odds on a near-term rate hike.
The Aussie climbed 0.4% to a peak of $0.6791, while a break of resistance at $0.6766 opened the way to targets at $0.6793, $0.6824 and the 2024 high of $0.6943.
Australian employment jumped by 65,200 jobs in December to easily outpace forecasts of a 30,000 increase and more than recover a loss the previous month.
The unemployment rate fell unexpectedly to 4.1%, the lowest in seven months and some way below the Reserve Bank of Australia’s own projection of 4.4%.
That strength mirrors signs of a pickup in consumer spending late last year and suggests the economy is accelerating quicker than policymakers had anticipated.
“With the labour market resilient as ever, household spending on an upswing and capacity pressures running high, there is a growing imperative for the RBA to tighten policy settings,” said Abhijit Surya, a senior APAC economist at Capital Economics.
“We’re growing increasingly confident in our view that the bank will hike rates by 25bp at its meeting in early February.”
Markets reacted by ramping up the risk of a quarter-point hike in the 3.6% cash rate when the RBA board meets on February 3. The probability quickly shifted to 54% from 27% before the data and a hike was now fully priced by May.
Three-year bond futures duly slid 5 ticks to 95.755 and briefly touched their lowest point since late 2023.
Much now depends on inflation data for the December quarter due next week where an increase in core inflation of 0.9% or more would pile pressure on for an early hike.
The Antipodean currencies had already rallied overnight when U.S. President Donald Trump said he would not use force to take Greenland and would not now impose fresh tariffs on European countries.
The resulting broad gains helped the Aussie hit an 18-month peak against the yen at 107.51, and an eight-month top on the euro at 0.5812 euros.
The kiwi dollar was also firm at $0.5845 after rising 0.2% overnight to reach a four-month top of $0.5865. A sustained breach of $0.5853 resistance sets up a return to $0.6007.
(Reporting by Wayne Cole; Editing by Thomas Derpinghaus)
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