The Australian dollar traded above 0.71, the highest level since February 2023. Markets priced roughly a 70% chance of another 25 bp Reserve Bank of Australia (RBA) rate hike in May. RBA Deputy Governor Andrew Hauser said inflation is still too high and policymakers are готов to act to bring it down. He also said the central bank should not comment on government spending choices, and that public and private demand should be weighed the same when judging inflation risks.

Rba Signals Inflation Focus

Hauser said the RBA lifted rates in February because global growth was stronger than expected, financial conditions were not as tight as assumed, and private demand rose faster than supply. He added that keeping the economy close to balance may have made Australia more sensitive to demand shocks. As price pressures return, this has renewed concerns about inflation risk. Housing finance data showed first-home-buyer loan commitments rose 6.8% quarter-on-quarter to 31,783 in the December quarter. This was the biggest increase since the same quarter in 2023, and commitments were up 9.1% year-on-year. The value of first-home-buyer loans climbed 15.5% quarter-on-quarter. The average first-home-buyer loan size rose 8.5% to a record $607,624, mainly due to New South Wales. A familiar pattern is starting to return, similar to early 2025. Back then, the RBA surprised markets with a more hawkish tone, which pushed the Aussie dollar higher as inflation stayed persistent. That period also saw a jump in housing loan commitments, showing strong domestic demand.

Markets Reprice Rate Path

This dynamic matters again because January 2026 CPI printed at 3.8%. That is still above the RBA’s target and higher than markets expected. As in the prior year, stubborn inflation is keeping policymakers hawkish even after multiple rate hikes in 2025. Ongoing strength in the domestic economy—especially in services—appears to be continuing to fuel inflation. Markets are adjusting. Overnight index swaps now imply a 45% chance of another RBA hike in March, up from about 20% two weeks ago. This shift suggests some traders who expected rate cuts this year are being forced to rethink. For derivatives traders, that may support the case for long Australian dollar exposure. With this backdrop, buying AUD/USD call options expiring in late March or April could be a sensible way to position for a hawkish RBA surprise. Implied volatility has risen to a three-month high of 9.2%, showing higher uncertainty and the potential for sharper moves. That setting tends to suit option strategies that benefit from both direction and rising volatility. The housing market is also adding to inflation pressure, much like it did in late 2024 and early 2025. January 2026 data showed national home prices up 0.6% month-over-month, holding firm despite higher rates. This resilience suggests household balance sheets remain strong, giving the RBA less reason to pause its inflation fight. This differs from the United States, where inflation has moved more steadily toward the Federal Reserve’s 2% goal. This policy gap—an RBA that stays hawkish while the Fed remains on hold—supports AUD/USD at a fundamental level. One sign is the widening yield spread between Australian and U.S. 2-year government bonds, which has shifted 15 basis points in the Aussie’s favor this month. Create your live VT Markets account and start trading now.

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