Strong Employment Print Keeps February Hike Firm

• A stronger-than-expected labour market has pushed the Reserve Bank of Australia’s February decision firmly onto next week’s Q4 inflation print, with market pricing now sitting just under a 60% chance of a hike.
• Employment surprised to the upside, rising 65k versus expectations of around 30k, reinforcing the ongoing strength in labour demand.
  The unemployment rate edged lower to 4.1% in December, down from 4.3% and below consensus, marking the lowest level since May in Australia.
• With unemployment now running below estimates of full employment, and against a backdrop of tight capacity and elevated inflation, this outcome is unlikely to have been well received by the RBA Board.
• Australian rates stayed on the back foot, with 3-year and 10-year bond futures extending the move and yields lifting another 3–4bps overnight.