How RBA’s rate hike propelled AUD/USD past 0.7000
AUD/USD finished higher last week at 0.7013, posting a solid 0.72% gain. This marked its third consecutive week of gains and, more significantly, its first weekly close above the psychological 0.7000 level since January 2023.
These gains occurred against the backdrop of an extremely volatile week. Risk assets, including equities, cryptocurrencies, and precious metals plunged sharply before mounting a strong rebound into the weekend. Despite the turbulence, the Australian dollar (AUD) demonstrated notable resilience, holding firm and pushing higher as the dust settled.
While overall volatility in the foreign exchange (FX) space didn’t reach the extremes seen in other asset classes last week, AUD/USD was further cushioned by the Reserve Bank of Australia (RBA). The RBA delivered its first rate hike in over two years, adopting a hawkish tone that widened the interest rate differential in favour of the AUD versus the United States dollar (USD) .
Future outlook for AUD/USD
Looking ahead, the path for AUD/USD will be shaped by incoming data ahead of the next RBA board meeting. Key domestic releases this week include:
- Westpac consumer confidence
- National Australia Bank (NAB) business confidence
Speeches from the RBA’s Hauser and Hunter
Furthermore, direction will depend on whether the elevated market volatility of 2026 subsides somewhat and the outcome of this week’s US non-farm payrolls report.
Westpac consumer confidence
Date: Tuesday, 10 February at 10.30am AEDT
For January, Australian consumer confidence dipped 1.7% to 92.9, sliding to a three-month low from December’s 94.5. This extended the sharp 9% drop seen the previous month, pushing sentiment deeper into pessimistic territory as households grappled with renewed RBA rate hike fears.
A key driver was surging mortgage rate expectations, fuelled by hawkish RBA signals and persistent inflation concerns. Partial offsets included modest gains in assessments of family finances compared to a year ago (2.3%) and longer-term economic views (0.9%), while house price expectations remained bullish but cooled slightly.
Looking ahead to February’s reading, the RBA’s 25 basis point (bp) rate hike last week, combined with a darkening inflation outlook and expectations of further tightening, suggests sentiment is likely to soften further toward the 90 mark.
The Australian interest rate market starts this week with 4 bp (16% probability) of a 25 bp rate hike built in for the RBA’s March meeting, with a full 25 bp hike priced for the RBA’s June meeting.
