AUD/USD Flat Amid US Dollar Strength, RBA Minutes Eyed

Why It Matters

The shift signals changing expectations for U.S. monetary policy that directly affect AUD demand, and upcoming RBA and Fed minutes could reignite volatility in the pair.

Key Takeaways

• AUD/USD steadied near 0.7072 after three‑year high
• Fed data shows slower inflation, stable unemployment
• Markets price over 50 bps rate cuts in 2026
• RBA raised cash rate to 3.85% amid inflation pressure
• US minutes and PCE data may shift market direction

Pulse Analysis

The Australian dollar’s recent pause near 0.7072 reflects a broader tug‑of‑war between U.S. monetary signals and domestic Australian policy. After the January CPI report showed inflation slipping to 2.4% and the unemployment rate nudging lower, market participants have begun to temper expectations for an aggressive Federal Reserve easing cycle. Yet the FedWatch tool still projects more than half a percentage point of cuts by year‑end, anchoring the greenback’s strength and keeping the AUD on the defensive.

On the Australian side, the Reserve Bank of Australia’s 25‑basis‑point hike to 3.85% underscores a hawkish stance aimed at curbing lingering price pressures. Higher rates bolster the AUD by widening the yield differential with the United States, but the RBA’s refusal to provide forward guidance adds uncertainty. Coupled with Australia’s reliance on iron‑ore exports and the health of the Chinese economy, any shift in commodity prices or trade data could quickly alter the currency’s trajectory.

Looking ahead, traders will watch the Fed’s meeting minutes on Wednesday and the core PCE inflation report on Friday for clues on the timing of rate cuts. The RBA minutes due Tuesday are equally pivotal, as they may reveal whether the central bank will consider further tightening amid stubborn inflation. Together, these data points create a narrow trading range but also set the stage for potential breakout moves, making risk‑on sentiment and global growth outlooks key variables for AUD/USD investors.

AUD/USD flat amid US Dollar strength, RBA minutes eyed

02/16/2026 17:54:22 GMT · By Vishal Chaturvedi, FXStreet

The Australian Dollar (AUD) trades little changed against the US Dollar (USD) on Monday, as a firmer Greenback keeps the Aussie on the defensive. At the time of writing, AUD/USD hovers around 0.7072, easing from three‑year highs near 0.7147 touched late last week.

Trading conditions also remain thin at the start of the week, further dampening volatility, with US markets closed for Presidents’ Day and several Asian markets observing the Lunar New Year holiday.

The Greenback is showing tentative signs of stabilisation after recent weakness, as investors reassess the timing of Federal Reserve interest‑rate cuts following last week’s labour‑market and inflation data.

• Headline Consumer Price Index (CPI) rose 0.2 % month‑on‑month in January, slowing from 0.3 % in December. On an annual basis, inflation eased to 2.4 % from 2.7 %.

• Unemployment rate edged down to 4.3 % from 4.4 %.

• Non‑farm payrolls increased by 130 K in January, rebounding from December’s revised 48 K gain and comfortably beating market expectations.

Taken together, firm labour‑market conditions have tempered expectations for near‑term easing, while moderating inflation keeps the Fed on a gradual rate‑cut path as price pressure trends closer to the 2 % target.

Following the CPI release, traders modestly increased their bets on policy easing later this year, with interest‑rate futures pricing in more than 50 basis points of cuts over the remainder of 2026. According to the CME FedWatch Tool, investors currently expect the first rate cut to come in June.

Attention now shifts to a heavy slate of US economic data due later this week. On Wednesday, investors will scrutinise the Fed’s latest Meeting Minutes for fresh clues on the monetary‑policy outlook. On Friday, markets will assess the core Personal Consumption Expenditures (PCE) inflation report and the advance reading of fourth‑quarter Gross Domestic Product (GDP).

In Australia, traders now await the Reserve Bank of Australia (RBA) Meeting Minutes due on Tuesday for more details on the central bank’s latest decision. The RBA began 2026 with a hawkish move, lifting the cash rate by 25 bps to 3.85 % from 3.60 % in response to ongoing inflation pressure.

Governor Michele Bullock reiterated that the Board would not offer forward guidance and would remain firmly focused on incoming data. Looking ahead, Thursday’s employment report will be key for shaping near‑term expectations, with markets increasingly pricing in the risk of another rate hike as early as May.

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Australian Dollar FAQs

What key factors drive the Australian Dollar?

One of the most significant factors for the AUD is the level of interest rates set by the RBA. Because Australia is a resource‑rich country, another key driver is the price of its biggest export, iron ore. The health of the Chinese economy, its largest trading partner, also matters, as do Australian inflation, growth, trade balance, and overall market sentiment (risk‑on vs. risk‑off).

How do the decisions of the Reserve Bank of Australia impact the Australian Dollar?

The RBA influences the AUD by setting the cash rate, which affects borrowing costs throughout the economy. Higher Australian rates relative to other major central banks tend to support the AUD, while lower rates tend to weaken it. The RBA can also use quantitative easing or tightening, which are AUD‑negative and AUD‑positive respectively.

How does the health of the Chinese Economy impact the Australian Dollar?

China is Australia’s largest trading partner. When the Chinese economy is strong, it purchases more Australian raw materials, goods, and services, boosting demand for the AUD. Conversely, a slowdown in China reduces demand for Australian exports and can depress the AUD.

How does the price of Iron Ore impact the Australian Dollar?

Iron ore is Australia’s largest export (about $118 billion a year). Higher iron‑ore prices generally lift the AUD because they improve Australia’s trade balance and export earnings. Lower iron‑ore prices have the opposite effect.

How does the Trade Balance impact the Australian Dollar?

A positive trade balance (more exports than imports) creates demand for the AUD, supporting its value. A trade deficit reduces demand for the currency and can weaken it.

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About the author

Vishal Chaturvedi – Macro‑focused research analyst with over four years of experience covering forex and commodities markets. He enjoys breaking down complex economic trends and turning them into clear, actionable insights that help traders stay ahead of the curve.