Outlook
The AUD remains supported by upbeat Chinese data and a risk-on backdrop, but gains may be tempered by China’s uneven rebound and potential domestic policy moves in Australia. January data due later this week—CPI and the Labour Force report—could shift near-term guidance on the RBA’s policy path. If risk appetite holds and rate expectations stay modestly hawkish, the AUD could push higher; if risk sentiment sour or the US dollar strengthens, the AUD may retreat from recent highs.
Key drivers
- Chinese data beating expectations boosted risk sentiment and demand for Australian exports, supporting the AUD.
- Minutes from the RBA’s December meeting suggested discussions of possible rate increases in 2026, underpinning a higher-yield story for the AUD.
- China’s uneven recovery dampened iron ore demand and weighed on the AUD’s outlook.
- Upcoming Australian CPI (January 7) and Labour Force (January 22) releases can alter near-term rate expectations and the AUD trajectory.
- The AUD’s status as a commodity and risk-on currency means it tracks commodity prices, global risk sentiment, and shifts in US dollar strength and carry trades.
Range
AUDUSD at 0.6756, 2.3% above its 3-month average of 0.6607, having traded in a 90-day range of 0.6444 to 0.6762.
AUDEUR at 0.5787, 2.0% above its 3-month average of 0.5674, with a 90-day range of 0.5591 to 0.5787.
AUDGBP at 0.5036, 1.4% above its 3-month average of 0.4963, within a 90-day range of 0.4887 to 0.5036.
AUDJPY at 107.0, 3.9% above its 3-month average of 103, trading in a 90-day range from 99.15 to 107.1.
What could change it
- A clearer shift in RBA policy expectations—either firmer rate hikes or a postponement—driven by domestic inflation and wages data.
- A more pronounced or softer China growth path affecting commodity demand and export volumes.
- Significant moves in global risk sentiment or a stronger US dollar impacting carry-trade flows.
- Unexpected Australian data surprises that alter near-term rate outlook.
