AUD/USD trades near 0.7110 on Wednesday, up 0.56%. It is supported by a stronger global mood and hawkish comments from the Reserve Bank of Australia (RBA). Support also comes from China’s latest CPI data, since China is Australia’s top trading partner. China’s inflation rose 0.2% year over year in January, down from 0.8% previously and below forecasts. Even so, the report hints that disinflation may be easing. That has helped Asia-linked currencies, including the Australian Dollar.

China Inflation And Rba Signal

RBA Deputy Governor Andrew Hauser said inflation is still too high, and the bank is ready to act again to bring it back to target. Markets have raised the odds of another 25 basis point rate hike at upcoming meetings. Australian housing credit data showed more first-home buyer loans and a higher average loan size. This suggests housing demand is still firm and could add to price pressures. In the US, January Nonfarm Payrolls rose by 130,000 versus 70,000 expected. The Unemployment Rate fell to 4.3%, and Average Hourly Earnings growth held at 3.7%. These results support the view that the Fed can keep rates in the 3.50%–3.75% range. However, downward revisions to earlier figures, tied to the annual benchmark update, point to weaker job growth last year. Focus now shifts to Australia’s Consumer Inflation Expectations on Thursday.

Early 2025 Versus Today

In early 2025, AUD/USD climbed toward 0.7110 after a hawkish RBA signal. Today, the pair is much lower near 0.6750, as markets respond to different pressures than a year ago. This change calls for a fresh look at the main drivers behind the pair. The RBA is still cautious, but less aggressively hawkish than before. The latest quarterly inflation data from January 2026 put CPI at 3.9%. Inflation has cooled, but it is still above the target band. The RBA has kept the cash rate at 4.60% in its last two meetings, showing it is now more data-dependent and less focused on pre-emptive tightening. Meanwhile, the US Federal Reserve is dealing with renewed inflation pressure. The January 2026 jobs report showed a strong gain of 210,000 jobs, and the latest CPI came in hotter than expected at 3.4% year over year. This has pushed expected Fed rate cuts further out, which has improved the US dollar’s appeal versus the Aussie. China, Australia’s key trading partner, is also offering less support than it did in early 2025. Recent PMI data has been mixed and has hovered around 50, the line between expansion and contraction. This points to a fragile recovery, which can weigh on Australian exports and the AUD. With the US economy holding up better than expected and Australia taking a more cautious path, strategies that benefit from possible AUD/USD downside may make sense. Buying AUD/USD put options is one defined-risk way to position for a drop, especially ahead of major US data releases. This approach aims to benefit from US dollar strength while limiting potential losses. Key risks to watch include next week’s US inflation data and the RBA meeting minutes for any shift in tone. The policy gap between the two central banks appears to be a stronger driver now than it was last year. If US data remains strong, it could speed up a move lower in the pair. Create your live VT Markets account and start trading now.

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