The Australian Dollar weakened despite China’s RatingDog PMI rising to 50.3 in January. Australia’s TD-MI Inflation increased by 3.6% year-over-year, but the monthly gauge slowed to 0.2%, the weakest since August. The US Dollar may further strengthen following Kevin Warsh’s nomination as Fed Chair, suggesting cautious monetary easing.
The AUD/USD pair remained weak on Monday after a 1% loss in the previous session. ANZ Job Advertisements in Australia rose 4.4% month-over-month in December 2025, the strongest gain since February 2022. These events precede the Reserve Bank of Australia’s policy meeting with continued cautiousness due to inflation and tight labour markets.
Australian Economic Data
Australia’s Consumer Price Index saw a rise of 3.8% YoY in December. The US Dollar Index (DXY) edged lower following robust gains, trading near 97.10. US PPI inflation held steady at 3.0% YoY in December. St. Louis and Atlanta Fed Presidents stress maintaining current policy rates, and Australia’s export prices showed a 3.2% QoQ rise in Q4 2025.
The AUD/USD pair traded around 0.6940, with potential support at 0.6920. Australia’s RBA’s decisions, China’s economic health, Iron Ore prices, and trade balance heavily influence the Australian Dollar. The Australian Dollar was weakest against the Euro.
The Australian Dollar is on the back foot as we start the week, even with some decent data from China. The bigger story is the strong US Dollar, which is gaining support from the nomination of a more hawkish Fed Chair and stubborn US inflation figures we saw at the end of 2025. All eyes are now on the Reserve Bank of Australia’s policy meeting tomorrow.
We see that the market is already betting heavily on the RBA raising rates, with a hike almost fully priced in for the near future. This means a simple rate increase might not be enough to push the Aussie dollar higher, as it’s already expected. Derivative traders should be wary of a potential dip in the AUD/USD if the RBA’s statement isn’t more aggressive than anticipated.
Trade Considerations
We also have to consider Australia’s key exports, and the price of iron ore has softened, with futures slipping from their late 2025 peaks of over $140 per tonne to around $130. This, combined with recent data showing China’s industrial profits grew at their slowest pace in months, suggests a potential headwind for the Australian dollar. These external factors support a more cautious stance on the currency.
On the other side of the trade, the US dollar continues to look strong. The nomination of Kevin Warsh to lead the Fed signals less appetite for rate cuts, and with recent US jobs data from January showing the economy added a robust 225,000 jobs, this narrative has legs. Any rallies in the AUD/USD could be viewed as selling opportunities in the coming weeks.
The AUD/USD is currently hovering just above key support around the 0.6920 level. A break below this support after the RBA meeting could trigger a faster move down. Therefore, traders might consider buying put options with a strike price below 0.6900 to position for a potential downward move.
