AUD/USD traded near 0.7090 during Asian trading on Wednesday, recovering from earlier losses. The rebound followed China’s January CPI, which rose 0.2% year-on-year. That was down from 0.8% in December and below the 0.4% forecast.
China’s CPI rose 0.2% month-on-month in January. This matched the previous reading but missed the 0.3% expectation. In Australia, Westpac Consumer Confidence fell 2.6% month-on-month to 90.5 in February, the lowest level in 10 months, after a 25 basis-point rate hike.
Australian Data And Us Demand Signals
NAB’s Business Confidence Index rose to 3 in January from a downwardly revised 2, its highest level since October. In the US, Retail Sales were flat at $735 billion in December after rising 0.6% in November. Markets had expected a 0.4% increase.
US Retail Sales rose 2.4% year-on-year. Total sales for October–December 2025 increased 3.0% (±0.4%) from a year earlier. Markets are pricing in 70,000 jobs in January Nonfarm Payrolls, with the unemployment rate expected to stay at 4.4%.
Key drivers of the Australian dollar include RBA interest rates, China’s economic outlook, and iron ore prices. Iron ore is Australia’s largest export, worth about $118 billion a year (2021 data). The trade balance can also influence the currency.
The Aussie is holding near 0.7090, but the tone looks fragile. China’s January inflation was only 0.2%, missing forecasts and slowing from December. This points to softer demand from Australia’s biggest trading partner.
Attention now turns to the upcoming US jobs report, where the market expects just 70,000 new jobs. In late 2025, job growth was much stronger, so this forecast signals a sharp shift in expectations for the US economy. Any meaningful surprise versus this low bar could drive the next major move in the US dollar.
Commodity And China Growth Headwinds
Commodity prices are another important factor for the Aussie. Iron ore has recently slipped back below $130 per tonne, down from the highs seen in late 2025. This pullback reflects weaker demand from China’s property and construction sectors.
China’s soft inflation print also fits a broader pattern. The official Manufacturing PMI for January came in at 49.3, staying in contraction for a fourth straight month. Ongoing weakness in industrial activity may limit how far the Australian dollar can rise.
Conditions at home are mixed, which supports a cautious view. Business confidence improved slightly, but the recent rate increase pushed consumer confidence to a 10-month low. This suggests the Reserve Bank of Australia is tightening policy as consumers lose momentum.
With these cross-currents, volatility may rise in the coming weeks, especially around US jobs data. Options strategies such as buying straddles or strangles on AUD/USD may allow traders to position for a sharp move without choosing a direction. The current calm looks unstable and may not last.
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