Australian Dollar Set for 1st Weekly Loss in Five

The Australian dollar steadied around $0.706 on Tuesday, trading near three-year peaks as investors brace for upcoming inflation data expected to reinforce a hawkish policy outlook. January’s consumer price figures, due Wednesday, are forecast to show the annual pace slowing only slightly to 3.7% from 3.8%, while core inflation is expected to hold at 3.3%, its fifth consecutive month above the central bank’s 2–3% target band. A 0.9% gain in the December quarter triggered the recent hike, and a repeat in the March quarter could further heighten pressure for another rate hike in May. Markets price in roughly a 70% probability of a 25-basis-point rate hike to 3.85% in May, with a June increase nearly fully priced in. All eyes will also be on RBA Governor Bullock at a Melbourne University event Wednesday evening, with any hawkish signals likely to boost the Aussie further. A weaker US dollar added support amid lingering uncertainty surrounding President Donald Trump’s tariff plans.

The Australian dollar edged higher to around $0.709 on Monday, moving toward three-year highs, as the US dollar weakened amid fresh tariff concerns. Over the weekend, President Donald Trump announced that global tariffs would rise from 10% to 15%, after the Supreme Court struck down a large portion of his earlier trade measures. Australia’s Trade Minister Don Farrell said the country is actively reviewing its options, coordinating with the embassy in Washington to evaluate potential impacts while reaffirming the nation’s commitment to free and fair trade. Meanwhile, the likelihood of a March rate hike is rising, following firmer domestic data and more hawkish signals from policymakers. Markets currently assign a 76% probability that the Reserve Bank will lift its cash rate by May, while the odds of a move as early as March have climbed to about 28%. Key data releases, including January’s monthly CPI and Q4 GDP, will be closely watched for signs that could prompt the RBA to move sooner.

The Australian dollar slipped to below $0.703 on Friday, heading for its first weekly loss in five weeks, pressured by a stronger US dollar and softer domestic PMI figures. Data showed February flash PMIs cooled across the board, pointing to slower growth but persistent inflation pressures. Composite, services, and manufacturing readings all eased from January, though each remained above 50, signaling continued expansion. Elsewhere, the greenback strengthened amid robust US economic data and hawkish signals from the Federal Reserve. Meanwhile, the likelihood of a March rate hike in Australia is rising, following firmer domestic data and more hawkish signals from policymakers. Markets now assign a 76% probability that the Reserve Bank will lift its cash rate by May, while the odds of a move as early as March have climbed to about 28%. May remains the base case unless key data releases, including January’s monthly CPI and fourth-quarter GDP, surprise strongly to the upside.