AUD/USD traded near 0.7090 during Asian hours on Tuesday after two days of gains, staying close to 0.7100. The Australian Dollar weakened as market sentiment turned cautious due to mixed local data. Westpac Consumer Confidence dropped 2.6% month-on-month to 90.5 in February, marking a 10-month low, following a 25 basis-point rate increase. Conversely, NAB’s Business Confidence Index rose to 3 in January from a revised 2, its highest since October.

Market Anticipation

Markets are looking forward to the delayed January US jobs report and upcoming CPI data. Investors are keen for insights on the US economic slowdown and possible Federal Reserve rate cuts. Traders believe the Fed will keep rates steady in March, with the first rate cut anticipated in June and another possible cut in September. US inflation expectations have decreased, with the median one-year forecast dropping to 3.1% in January from 3.4% in December, the lowest in six months. Food price expectations remained at 5.7%, while three- and five-year forecasts held steady at 3%. US Treasury Secretary Scott Bessent mentioned that a criminal investigation into Kevin Warsh, President Donald Trump’s nominee for Fed chair, could arise if he refuses to lower rates.

Currency Comparison

The Aussie dollar shows continued weakness, now trading around 0.6650, a significant decline from previous years. This pressure arises from a clear policy divide, with the Reserve Bank of Australia keeping its cash rate stable while the US Federal Reserve hints at more easing to come. This difference is expected to affect the pair in the near future. Reflecting back, concerns emerged in early 2023 when consumer confidence plummeted due to rate hikes. Today, this negative sentiment persists, with the latest Westpac Consumer Confidence index for February 2026 at a low 84.2. The ongoing pessimism in Australia offers little reason for the RBA to adopt a hawkish stance compared to global peers. The focus has shifted from whether the Fed will ease to how quickly they will cut rates. With US core CPI stabilizing around 2.5% year-over-year, the Fed has more flexibility than the RBA, which continues to face stubborn domestic inflation. This situation supports a stronger US dollar compared to the Australian dollar. A major factor in our negative outlook is the sluggishness of China’s economy, which directly impacts demand for industrial metals. Iron ore prices have fallen to about $105 per tonne, sharply down from the over $130 per tonne highs earlier in 2024. This decline in Australia’s key export revenue puts additional strain on the currency’s value. Given this backdrop, we anticipate further AUD/USD weakness in the coming weeks. Buying March or April expiry put options with a strike price around 0.6600 is a straightforward strategy to benefit from a potential drop toward the 0.6500 support level. For a more defined risk approach, a bear put spread would also work well. Create your live VT Markets account and start trading now.

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