The Australian Dollar fell slightly after two days of gains, even though the Westpac Leading Economic Index rose by 0.1% in December 2025. The economic recovery appears to be extending into early 2026, with the six-month annualised growth rate increasing to 0.42%. <\/p>\n
Despite concerns between the US and Greenland, the US Dollar recovered losses. The US Dollar Index was trading around 98.60 as the US plans new tariffs on some EU countries, amidst tensions with Greenland. The Federal Reserve may delay rate cuts until clearer evidence shows inflation reaching the 2% target. <\/p>\n
China’s economy is growing, with December showing a 5.2% rise in Industrial Production year-over-year. Australia\u2019s TD-MI Inflation Gauge increased to 3.5% in December, showing potential future monetary tightening. The RBA anticipates only one additional rate cut this year, with inflation expected to remain above 3% short-term.<\/p>\n
The AUD\/USD pair trades around 0.6740, showing a bullish short-term outlook, while aiming for a 15-month high of 0.6766. The Australian Dollar was weakest against the New Zealand Dollar, as shown in the currency percentage change heatmap. Tariffs play a role in international trade dynamics, with various opinions on their benefits and drawbacks.<\/p>\n
We are seeing the Australian Dollar hold its ground near a 15-month high against the US Dollar, creating a bullish setup for the coming weeks. The primary driver is persistent inflation in Australia, which strengthens the case for the Reserve Bank of Australia to maintain a tight monetary policy. Buying AUD\/USD call options could be a way to position for a potential breakout above the recent highs.<\/p>\n
The latest inflation figures from the Australian Bureau of Statistics showed that the Q4 2025 Consumer Price Index rose 3.6% year-over-year, coming in hotter than anticipated. Looking back at 2025, inflation proved sticky, remaining stubbornly above the RBA\u2019s target band for the entire year. This persistent price pressure makes further rate cuts unlikely and keeps the possibility of a hike on the table, which supports the Aussie dollar.<\/p>\n
On the other side of the trade, the US Dollar is facing headwinds from renewed geopolitical uncertainty. President Trump\u2019s tariff threats against the European Union over the Greenland issue are creating worries about slower global growth and weighing on the dollar. We saw similar USD weakness during the peak of the US-China trade tensions back in 2018 and 2019, suggesting this pattern of tariff talk leading to dollar volatility could repeat.<\/p>\n
Supporting the Australian Dollar is the stable economic situation in China, Australia’s most significant trading partner. Recent Chinese data showed solid industrial production and better-than-expected GDP growth, which helps secure demand for Australian exports like iron ore. In fact, iron ore futures are currently trading near multi-year highs of over \u00a5950 per tonne, providing a direct boost to Australia\u2019s terms of trade.<\/p>\n
From a technical standpoint, the AUD\/USD pair is trading above key short-term moving averages, with the Relative Strength Index suggesting more room to climb before being overbought. A sustained move above the 0.6766 level would signal a significant bullish breakout. We would consider setting strike prices for call options above this key resistance to capture the expected upward momentum.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Australian Dollar dips slightly; economic growth steady. US Dollar recovers amid tariffs, Fed cautious on inflation.<\/p>\n","protected":false},"author":62,"featured_media":16965,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-39716","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\/39716","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=39716"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/39716\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/16965"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=39716"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=39716"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=39716"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}