The Australian Dollar increased after the RBA Minutes showed worries about ongoing inflation. However, strong US data limited its gains. On Tuesday, the Australian Dollar was at 0.6680, up 0.40%, but it fell from a three-month high of 0.6700 because solid US economic reports supported the US Dollar. The RBA Minutes suggested that inflation might last longer than expected, leading policymakers to rethink their data-driven approach. They noted upcoming inflation reports before the February meeting and discussed possible rate hikes in 2026. Market expectations show caution towards immediate rate increases, although some anticipate future tightening. In December, Australia’s Consumer Inflation Expectations rose to 4.7%, which backs the RBA’s outlook.

Strong US Dollar Performance

The US Dollar remained robust after better-than-expected economic data. The US economy grew by 4.3% in Q3, exceeding forecasts of 3.8%. Inflation rates were also higher than predicted, indicating ongoing price pressures. Labour market data supported the dollar, as private sector job growth stayed stable, even though overall industrial production dipped slightly by 0.1% in October. US Consumer Confidence fell to 89.1 in December, reflecting worries over high borrowing costs and inflation. Overall, strong US data helped stabilize the US Dollar, causing the AUD/USD pair to drop from its recent highs. The RBA’s recent minutes reveal concerns about persistent inflation, supporting the Aussie dollar. However, solid growth numbers from the US are keeping the US dollar strong, limiting significant gains. As we approach the new year, the AUD/USD pair finds itself in a close contest. With key inflation data for Australia’s fourth quarter expected on January 28, 2026, we anticipate a significant price move. This uncertainty makes buying options, like a long strangle, an appealing strategy. This approach allows traders to profit from large price swings in either direction without needing to predict the outcome.

Trading Options and Strategies

If we believe this stalemate will continue, selling options could be a better strategy. Given the recent strength of both economies, the pair may stay between roughly 0.6600 and 0.6750. The CBOE/CME FX Australian Dollar Volatility Index (AUDVIX) has risen to 9.8% this week, making low-volatility strategies like an iron condor more appealing. It’s important to remember the sharp but brief spike in the pair back in mid-2025 when similar conflicting data was released. For those optimistic about the Aussie dollar, buying a call spread could be a smart way to speculate on potential upside while managing risk. This strategy would benefit if AUD/USD rises toward its recent highs but would also guard against a sudden downturn due to strong US data. The strength of the US dollar is significant, especially with Q3 2025 growth revised up to 4.3%. All eyes will be on the upcoming Non-Farm Payrolls report for December, which is expected in the first week of January 2026. Another strong jobs report could easily push AUD/USD back down to test recent lows. Create your live VT Markets account and start trading now.

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