Currency market update: RBA bucks the global trend
The Reserve Bank of Australia looks ready to zig while the rest of the world zags.
Markets are pricing in a 25-basis-point rate hike to 3.85% in February, which would mark the RBA’s first increase in more than two years, even as other central banks eye cuts.
The reason: inflation just won’t cool its jets.
Australia’s CPI jumped to 3.8% in December, beating expectations, while the RBA’s preferred trimmed mean inflation also ran hotter than forecast. Governor Michele Bullock hasn’t exactly played it down, saying the Board will do “what it needs to do” if inflation doesn’t slow.
The case for a hike is stacking up:
- Money markets now see a 73% chance of a hike
- All four major Australian banks are on board
- Unemployment fell to 4.1%, with a surprise surge in jobs
The decision could spark big moves in AUD/USD, with hawkish signals potentially pushing the Aussie higher—and any hint of caution sending it the other way.
“The Aussie pair could reverse course and initiate a fresh uptrend toward the 0.7050 psychological level on a hawkish RBA rate hike. The next relevant resistance levels are aligned at the 2026 high of 0.7094 and the February 2023 high of 0.7158.”
