The AUD\/USD pair rises towards 0.6690, recovering recent losses during the Asian trading hours. This increase stems from expectations of interest rate hikes by the Reserve Bank of Australia (RBA). A stronger-than-expected Q4 core inflation reading might prompt a rate hike at the RBA’s meeting in February. RBA Governor Michele Bullock mentioned that conditions for potential rate hikes were under discussion for 2026.<\/p>\n
The S&P Global Australia Manufacturing PMI is unchanged from November, rating at 51.6 for December. There is a modest expansion in output and new orders. Meanwhile, the US Dollar struggles amid prospects of two Federal Reserve rate cuts in 2026. Market attention is also on US President Trump’s forthcoming pick for a new Fed chair to replace Jerome Powell, potentially affecting monetary policy towards lower interest rates.<\/p>\n
The FOMC December Meeting Minutes revealed a stance to avoid further rate cuts if inflation decreases over time. Conversely, some Fed officials preferred keeping rates stable after three reductions in 2025. The Australian Dollar is influenced by factors like interest rates set by RBA, the price of Iron Ore, and the health of the Chinese economy. A positive Trade Balance also strengthens the AUD.<\/p>\n
The key theme for us is the widening gap between the RBA and the Fed’s monetary policy. We are seeing growing bets on a rate hike at the RBA’s February 3 meeting, with overnight swaps now pricing in about a 65% probability. This contrasts sharply with the Fed, which already cut rates three times in 2025 to support a softening labor market.<\/p>\n
All eyes should be on Australia’s Q4 CPI report due on January 28. Remember that core inflation surprised to the upside in Q3 2025, and another strong reading will almost certainly force the RBA to act. Therefore, buying AUD\/USD call options that expire in February could capture any upward move following that data release.<\/p>\n
We are also seeing fundamental support from rising commodity prices. Iron ore futures recently climbed to over $140 per tonne, a multi-month high, on news of surprisingly resilient steel demand from China. This strengthens Australia’s trade balance and provides a natural tailwind for the currency.<\/p>\n
On the other side of the pair, the US Dollar remains under pressure. The market is anticipating at least two more rate cuts this year, a view reinforced by the potential for a new, more dovish Fed chair to be nominated in May. This expectation should limit any significant rallies in the US Dollar for the time being.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" AUD\/USD climbs toward 0.6690 amid RBA rate hike expectations and weaker US Dollar sentiment.<\/p>\n","protected":false},"author":62,"featured_media":16964,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-38080","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/38080","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=38080"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/38080\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/16964"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=38080"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=38080"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=38080"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}