The Australian Dollar is trading near three-year highs, buoyed by a hawkish stance from the Reserve Bank of Australia (RBA) and persistent inflation. The RBA has indicated readiness to raise rates further if inflation remains high, a sentiment echoed by multiple officials. While recent Australian economic data has been reassuring but not spectacular, the labor market remains strong. The currency also benefits from underlying support from China.
- The RBA remains ready to lift rates further if inflation proves persistent.
- Inflation expectations jumped to 5% in February, the highest since mid-2025.
- Economists widely expect a possible rate hike in May.
- The AUD/USD pair remains close to a three-year high.
- The RBA’s hawkish narrative supports the Australian Dollar.
- Australia’s economy is easing in an orderly way, keeping the soft landing story alive.
- The labour market continues to impress, with a low unemployment rate.
- Inflation remains above target.
- Housing credit is surging, pointing to loose conditions.
- China provides a decent underlying cushion for the Aussie.
- Non-commercial traders have increased their net long positions.
The confluence of factors, notably the central bank’s commitment to controlling inflation through potential rate hikes and the resilient domestic economy, suggests continued support for the asset. While external factors like global risk appetite and developments in the United States and China can influence its trajectory, the underlying strength appears to be driven by domestic policies and economic conditions.