Bias: Mixed. The AUD faces headwinds from China's softer inflation and weaker export demand, but is supported by RBA rate-hike expectations and a softer USD, giving a cautious upside bias that may remain range-bound in the near term.
Key drivers
- RBA December meeting minutes signaling potential rate hikes in 2026, supporting higher Australian yields.
- China’s December inflation underwhelmed, highlighting disinflation risks and softer demand for Australian commodities such as iron ore.
- The AUD has been strengthening against the USD on rate-hike expectations and a softer U.S. dollar, with the pair hovering near multi-month highs.
- China’s uneven recovery continues to complicate the commodity backdrop, weighing on export-driven AUD moves.
- Upcoming Australian data (CPI on Jan 7 and Labour Force on Jan 22) could shift the AUD trajectory as domestic momentum feeds policy expectations.
- The AUD remains a commodity currency, sensitive to iron ore, coal, and energy prices, and to overall risk sentiment and carry-trade flows.
Range
- AUD/USD: 0.6444–0.6739 (current 0.6689)
- AUD/EUR: 0.5589–0.5771 (current 0.5755)
- AUD/GBP: 0.4853–0.5007 (current 0.4992)
- AUD/JPY: 98.20–106.30 (current 105.4)
What could change it
- Strong domestic data (CPI strength or robust employment) or clearer RBA guidance confirming 2026 hikes could push AUD higher.
- Any signs of a firmer Chinese rebound or improved demand for Australian exports would support the AUD.
- Renewed risk appetite or a weaker USD could lift AUD across majors.
- Deterioration in global growth outlook, a stronger USD, or softer commodity prices (iron ore, coal) could weigh on the AUD.
- Unexpected central-bank moves (RBA or Fed) or shifts in global trade dynamics.
