The Australian Dollar advances against the US Dollar on Tuesday, supported by the release of the Reserve Bank of Australia’s (RBA) December meeting Minutes and renewed weakness in the greenback. The AUD/USD pair moves higher as expectations for continued policy easing by the US Federal Reserve weigh on the USD, amplified by President Donald Trump’s repeated calls for lower borrowing costs.
RBA minutes reinforce cautious hawkish bias
The RBA Minutes revealed that board members have become less confident that monetary policy remains sufficiently restrictive, as evidence suggests inflationary pressures may be more persistent than previously anticipated.
Policymakers emphasized that future decisions will remain data-dependent, noting that a full set of G4 inflation data will be available ahead of the February meeting. Discussions also touched on the possibility that a rate increase could be required at some point in 2026, with officials stressing that more time is needed to assess the durability of inflation trends.
Rate expectations remain finely balanced
Market pricing reflects this cautious stance. ASX 30-Day Interbank Cash Rate Futures for February 2026 were trading at 96.34 as of December 18, implying a 27% probability of a rate hike to 3.85% at the next RBA Board meeting. Rising Australian inflation expectations continue to underpin the central bank’s relatively hawkish tone.
US dollar pressured ahead of key data
The US Dollar Index (DXY) trades lower near 98.20, with investors awaiting the annualized US Gross Domestic Product (GDP) data for the third quarter due later on Tuesday. The US economy is expected to have expanded at a 3.2% annualized pace in Q3, easing from 3.8% growth in Q2. The greenback also faces headwinds from a rally in precious metals, supported by safe-haven demand amid escalating geopolitical tensions involving the US and Venezuela.
Fed signals add to USD uncertainty
Federal Reserve commentary continues to send mixed signals. Governor Stephen Miran noted that recent data aligns with his outlook and that he does not foresee a near-term recession, while warning that failing to ease policy could raise recession risks. Meanwhile, Cleveland Fed President Beth Hammack said monetary policy is well positioned to pause and assess the impact of the cumulative 75-basis-point rate cuts during the first quarter.
According to the CME FedWatch tool, markets now see an 80% probability that rates will be left unchanged at the January Fed meeting, with expectations for a 25-basis-point cut declining.
external factors support AUD sentiment
Australia’s Consumer Inflation Expectations rose to 4.7% in December from 4.5% in November, reinforcing the RBA’s cautious stance on easing. In the region, the People’s Bank of China left its one- and five-year Loan Prime Rates unchanged at 3.00% and 3.50%, respectively, offering a stable backdrop for the China-sensitive Australian Dollar.
AUD/USD approaches three-month highs
From a technical perspective, AUD/USD trades below 0.6660, maintaining a constructive tone. The pair has rebounded above the lower boundary of its ascending channel, signaling strengthening bullish momentum.
The 14-day RSI stands at 63.34, consistent with positive momentum conditions. A sustained move above the nine-day Exponential Moving Average has opened the path toward the three-month high at 0.6685, followed by 0.6707, the highest level since October 2024. On the downside, immediate support is seen at 0.6633, near the lower channel boundary around 0.6630, while a decisive break below this zone would expose the six-month low near 0.6414.
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