The Australian Dollar experienced weakness against the US Dollar as a firmer greenback, buoyed by expectations of a hawkish Federal Reserve under a potential Kevin Warsh chairmanship, exerted downward pressure. This was partially offset by strong expectations of a 25 bps rate hike by the Reserve Bank of Australia (RBA) in an attempt to control inflation. Mixed economic data, including slowing inflation and rising job advertisements, contributes to the complex outlook for the AUD.
- The Australian Dollar weakened against the US Dollar, trading around $0.69.
- Markets widely anticipate a 25 bps rate hike by the RBA, potentially raising the cash rate to 3.85%.
- Australia’s Monthly Inflation Gauge slowed to 0.2% in January 2026, the slowest pace since August 2025.
- ANZ-Indeed Job Ads jumped 4.4% month-on-month in December 2025.
- TD-MI Inflation Gauge rose 3.6% year-over-year (YoY) in January.
- Australia’s Consumer Price Index (CPI) rose 3.8% YoY in December.
- Markets price in over a 70% chance of a 25-basis-point (bps) hike by the RBA from the 3.6% cash rate.
The currency’s near-term trajectory hinges on the RBA’s decision regarding interest rates. While inflationary pressures persist and labor market conditions remain tight, supporting a potential rate hike, slowing inflation could temper the central bank’s aggressiveness. A stronger US dollar and global risk sentiment will also play a significant role in influencing the AUD’s movements. The interplay between domestic economic data and international factors will ultimately determine the direction of the Australian Dollar.