Outlook
Markets price in a 25 basis point RBA hike at the February 3 meeting. If the hike is delivered and commodity prices remain supportive, the AUD could press toward the upper end of recent ranges (around 0.70–0.71 against the USD). If China demand weakens further or U.S. dollar strength returns on a tighter global environment, the AUD may drift lower toward the 0.68 area or below.
Key drivers
- RBA policy stance: cash rate at 3.6% since December 2025; minutes pointed to potential hikes in 2026 due to inflation risks.
- Inflation and jobs data: CPI for November 2025 released in January 2026; unemployment ended 2025 at 4.1%, with expectations of a 25bp hike on February 3, 2026.
- Commodity and trade dynamics: iron ore prices showing modest declines, while overall commodity complex can still influence AUD; exports to China fell about 17% last year, signaling softer demand from Australia’s largest partner.
- Global policy and growth: US Federal Reserve cuts in December 2025 and potential easing in 2026 have supported USD movements and cross-rate dynamics; China’s uneven recovery continues to color demand for Australian exports.
- Market sentiment and risk appetite: AUD tends to rise with risk-on sentiment and fall with risk-off shifts; China trade ties and broader global growth trajectories remain important near-term drivers.
- Current price action context: AUDUSD around 0.6960, about 4.7% above its 3-month average (0.665). The pair traded in a volatile range from 0.6444 to 0.7046 (roughly 9.3%): AUDJPY around 107.7 (3-month average 103.7; range 99.15–108.3); AUDEUR around 0.5872 (3-month average 0.5696; range 0.5591–0.5888); AUDGBP around 0.5083 (3-month average 0.4978; range 0.4913–0.5104).
Range
AUDUSD current 0.6960; 3-month average 0.665; range 0.6444–0.7046 (about a 9.3% swing)
AUDEUR current 0.5872; 3-month average 0.5696; range 0.5591–0.5888 (about a 5.3% swing)
AUDGBP current 0.5083; 3-month average 0.4978; range 0.4913–0.5104 (about a 3.9% swing)
AUDJPY current 107.7; 3-month average 103.7; range 99.15–108.3 (about a 9.2% swing)
What could change it
- RBA decision at the February 3 meeting: a confirmed hike supports the AUD; a hold or dovish outcome pressures the AUD.
- China demand and commodity prices: further weakness in China or a sustained decline in iron ore and other exports could weigh on the AUD.
- U.S. dollar trajectory and global rates: shifts in Fed policy expectations or stronger USD could drag AUD lower.
- Domestic inflation surprises or labour market data: hotter-than-expected inflation or a stronger labour market could push the RBA further toward tightening. A softer print could temper rate-hike bets and limit AUD upside.
- Global risk sentiment: renewed risk-off episodes or geopolitical tensions can trigger broad USD strength and AUD weakness.
