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Forex

AUSTRALIAN DOLLAR NEEDS RBA SUPPORT FOR FURTHER STRENGTH

ADMIN || 9th December 2025

The Australian dollar heads into Tuesday’s RBA meeting with expectations tilted toward a more hawkish interpretation of domestic resilience. Anything that falls short of that scenario, and the currency stands at serious risk of unwinding its recent run.

The cash rate is expected to hold at 3.6%, but the communication will carry greater weight. Headline inflation sits above the RBA’s target band, housing indicators have reaccelerated, and the labor market remains resilient, a combination that lifts the relevance of whether the RBA acknowledges that the next move will be a hike should current conditions persist.

The global backdrop makes that nuance more consequential. Forward curves across Canada and even the euro area have modestly shifted toward tighter policy expectations for next year, reflecting signs that earlier disinflation progress may no longer be linear. In Australia, firmer demand and renewed price pressures have pushed domestic yields to their highest levels since 2023, with the policy path in mid-2026 now carrying a discernible tightening bias.

AUD/USD sits at the intersection of these developments. The currency has climbed toward the top of its 12-month range, with policy confirmation needed to extend that performance. Evidence of strength is embedded in AUD/NZD, where domestic green shoots and a softer New Zealand backdrop produced a 9.2% peak-to-trough advance this year. Momentum cooled only after the cross broke above 1.16 for the first time since 2013, but any reinforcement from the RBA could see an Aussie bid express itself more cleanly in the non-dollar crosses given the distortions of a Federal Reserve-heavy week.

The RBA may hold back on revealing its forward bias, but the currency’s next leg hinges on whether the board chooses to nod to very tangible reacceleration risks.

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