AUD Slides for Sixth Straight Day While RBA Hawkish Signals Build Momentum

The Australian Dollar today continues its downward trajectory, marking the sixth consecutive session of weakness against the US Dollar. Despite mounting expectations of an early rate hike from the Reserve Bank of Australia, the Aussie struggles to find sustainable buying interest.

Consumer Inflation Expectations Climb, But Support Remains Elusive

Fresh data reveals that Australia’s Consumer Inflation Expectations jumped to 4.7% in December, up from November’s three-month low of 4.5%. This uptick in price expectations typically bolsters arguments for central bank tightening, yet the Australian Dollar rate today shows persistent softness as traders digest mixed signals from the broader market environment.

The rise in inflation expectations has prompted Commonwealth Bank of Australia and National Australia Bank to revise their rate path forecasts, now anticipating the RBA will begin hiking sooner than previously expected. Their updated projections followed the central bank’s notably hawkish stance during its final 2025 policy meeting. Market pricing now suggests a 28% probability of a February hike, with March at nearly 41%, and August almost fully priced in.

US Dollar Holds Firm as Fed Rate Cut Narrative Weakens

The broader currency landscape heavily favors the greenback. The US Dollar Index, tracking the USD’s performance against six major counterparts, maintains positioning near 98.40 as expectations for additional Federal Reserve rate cuts continue to fade.

Recent American labor market data painted a complex picture. November payrolls grew by 64,000—marginally above expectations—though October figures were significantly downwardly revised. The unemployment rate ticked up to 4.6%, the highest since 2021, indicating a gradual deceleration in job creation and pointing to a cooling labor market. Retail sales came in flat month-over-month, suggesting consumer spending momentum may be losing steam.

Fed policymakers remain divided on whether further easing is warranted in 2026. The consensus dot plot showed officials penciling in just one rate cut next year, while some see no reductions at all. Yet derivatives markets are pricing in two potential cuts, creating a divergence between official guidance and market expectations. The CME FedWatch tool indicates a 74.4% probability that the Fed will hold rates steady at January’s meeting, up from approximately 70% one week prior.

Asia-Pacific Economic Indicators Offer Contrasting Signals

China’s economic momentum showed signs of deceleration in November. Retail Sales expanded 1.3% year-over-year, missing forecasts of 2.9% and falling sharply from October’s 2.9% growth. Industrial Production rose 4.8% annually, below the 5.0% projection. Fixed Asset Investment deteriorated to -2.6% year-to-date, undershooting the expected -2.3%.

Australia’s manufacturing sector displayed modest resilience. The preliminary S&P Global Manufacturing PMI edged higher to 52.2 in December from 51.6 previously. However, Services PMI declined to 51.0 from 52.8, while the Composite PMI fell to 51.1 from 52.6. Meanwhile, the unemployment rate held steady at 4.3% in November, beating the 4.4% consensus. Employment Change came in at -21.3K for the month after a revised +41.1K in October, surprising to the downside versus the expected 20K gain.

Technical Picture Deteriorates as AUD/USD Breaks Key Support

From a technical standpoint, the Australian Dollar rate chart tells a bearish story. The AUD/USD pair has slipped below the 0.6600 threshold and now trades beneath its ascending channel, signaling a weakening of the prior bullish structure. The pair also sits below its nine-day Exponential Moving Average, confirming diminished short-term momentum.

Downside targets come into focus as the pair approaches the psychological 0.6500 level. Should sellers maintain control, the six-month low of 0.6414 recorded on August 21 remains within striking distance.

On the recovery side, the nine-day EMA presents initial resistance at 0.6619. Reclaiming the ascending channel would require a push toward the three-month high of 0.6685, with the October 2024 peak of 0.6707 serving as the next meaningful obstacle. A sustained rally would test the upper channel boundary near 0.6760.

Currency Cross-Rates Paint a Challenging Picture

The Australian Dollar today appears weak across most major currency pairings. The Aussie posted the steepest losses against the Japanese Yen, underscoring its status as a risk-sensitive currency amid shifting market sentiment. Against the US Dollar, sterling, euro, and most developed-market peers, AUD showed notable underperformance, reflecting its defensive positioning in the current environment.

The divergence between RBA tightening expectations and broader dollar strength illustrates why the Australian Dollar remains under pressure despite hawkish policy signals—a reminder that interest rate differentials alone cannot overcome powerful USD momentum driven by Fed uncertainty and strong economic data.