The Australian Dollar is currently trading near three-year peaks, buoyed by expectations of continued hawkish monetary policy from the Reserve Bank of Australia (RBA). Upcoming inflation data is crucial as it is expected to influence the RBA’s future decisions regarding interest rate hikes. However, uncertainty surrounding potential US tariffs adds a layer of complexity, potentially weighing on the Aussie due to its sensitivity to global trade dynamics.
- Australian Dollar steadied around $0.706, near three-year peaks.
- January CPI data expected to show annual inflation slowing slightly to 3.7%.
- Core inflation expected to hold at 3.3%, above the RBA’s 2-3% target band.
- Markets price in roughly a 70% probability of a 25-basis-point rate hike in May.
- RBA Governor Bullock’s speech is keenly awaited for hawkish signals.
- Potential US tariffs pose a threat to the Aussie due to trade sensitivity.
- A restrictive Australian monetary policy supports the AUD.
The Australian Dollar is at a critical juncture, with its near-term performance heavily dependent on the upcoming inflation figures and the RBA’s reaction. Strong inflation data could reinforce expectations of further rate hikes, providing additional support. However, escalating trade tensions stemming from potential US tariffs could offset these gains, introducing volatility and potentially leading to a pullback. The balance between domestic monetary policy and global trade dynamics will dictate the direction of the currency.