The Australian dollar rose more than 0.80% against the US dollar on Wednesday. AUD/USD traded at 0.7118 after bouncing from a low of 0.7057.
Australian inflation data came in above forecasts in January, which increased expectations that the Reserve Bank of Australia (RBA) may keep policy tighter. CPI rose 0.4% month-on-month versus 0.3% expected. Headline inflation was 3.8% year-on-year, and trimmed mean inflation rose from 3.3% to 3.4% year-on-year.
Fed And Rba Messaging
Federal Reserve officials also spoke, including Thomas Barkin and Jeffrey Schmid. RBA Governor Michelle Bullock said the economy has changed quickly since mid-2025, as disinflation progressed and growth slowed.
Earlier this month, the RBA raised rates by 25 basis points to 3.85% after a strong jobs report. Markets priced in Fed cuts totalling 51 bps by year-end, while the RBA was projected to raise rates by 45 bps.
In the week ahead, key releases include Australia’s Private Capital Expenditure (expected at 0%) and US Initial Jobless Claims on Thursday. Technical levels highlighted included support near 0.7050, 0.7000, and around 0.6900. Resistance was noted at 0.7150, 0.7200, and 0.7300. RSI was around 65.
In 2025, a strong inflation report also pushed the Australian dollar higher versus the US dollar. Underlying inflation hit its highest level in more than a year, which pushed the RBA toward a more aggressive stance. This policy gap has remained a key theme, with AUD/USD now trading near 0.7450.
Rba Policy And Market Implications
The RBA followed through on the hawkish shift, lifting the cash rate to 4.35% in late 2025. Inflation has eased from its peak, but the latest data shows it is still sticky at 3.9% year-over-year—well above the RBA’s target. That persistence supports the central bank’s decision to keep rates high for now.
Australia’s labour market also remains tight. The unemployment rate was 4.1% in January, giving the RBA little reason to consider near-term easing. This contrasts with the US Federal Reserve, which has taken a cautious stance after a single 25 basis point cut in late 2025.
For derivatives traders, the positive carry on long AUD positions remains attractive because of the interest-rate gap. However, as the initial sharp rally loses momentum, selling out-of-the-money puts or using bull put spreads may be a sensible way to collect premium while keeping a bullish view. The pair may find support near 0.7300, which was the prior upside target in 2025.
It’s also important to watch global risk sentiment, because the Australian dollar often weakens in risk-off markets. A sudden jump in US inflation could quickly reduce expectations for Fed easing, narrowing the policy gap that has supported the Aussie. For that reason, tracking implied volatility in AUD/USD options remains important for managing risk in the weeks ahead.
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