AUD/USD traded around 0.7140 on Thursday, up 0.21% after touching a three-year high of 0.7147. It eased as the US Dollar regained ground after firm US jobs data, but it stayed above 0.7100.
In Australia, consumer inflation expectations rose to 5% in February from 4.6% in January, the highest in nearly three years. This keeps attention on further Reserve Bank of Australia policy tightening.
Rba Policy Outlook
Last week the RBA lifted its key rate for the first time in more than two years, taking it to 3.85%. The central bank said more rises are possible if inflation remains persistent, and it remains data-dependent.
In the US, Nonfarm Payrolls rose by 130K in January versus 70K expected. The Unemployment Rate fell to 4.3% from 4.4%, while gains were concentrated in healthcare and earlier data were revised down.
Weekly Initial Jobless Claims fell to 227K on Thursday. This reduces expectations of a near-term Federal Reserve rate cut, with markets lowering the chance of March easing and leaning towards June.
We remember how the Australian dollar was trading near three-year highs around this time in 2025, touching 0.7147. This strength was largely driven by consumer inflation expectations hitting 5%, which fueled bets that the Reserve Bank of Australia (RBA) would keep hiking rates. At that point, the RBA had just raised its key rate to 3.85%.
Market Regime Shift
Fast forward to today, February 12, 2026, and the picture has shifted considerably. The latest official data for the fourth quarter of 2025 showed Australia’s annual inflation rate has cooled to 3.4%, a significant improvement but still above the RBA’s target. Consequently, the RBA has paused its hiking cycle, holding the cash rate steady at 4.35% for the last four months.
On the other side of the pair, the US labor market concerns from early 2025 did not lead to the sharp downturn some feared. US inflation is now hovering just under 3%, and the Federal Reserve has also signaled a patient, data-dependent stance with rate cuts not expected until at least the third quarter of this year. This contrasts with early 2025 when markets were pricing in much earlier cuts from the Fed.
Given that both central banks are now in a holding pattern, the strong directional momentum we saw in early 2025 is gone. Derivative traders should consider that implied volatility in AUD/USD has decreased, with the pair currently trading in a tighter range around 0.6650. Strategies that profit from range-bound markets and lower volatility, such as selling straddles or setting up iron condors, may be more appropriate now than buying options expecting big upward moves.
