Aussie Weakens for 5 Days—Could the RBA "Surprise" in February?
The Australian dollar (AUD) weakened again against the US dollar (USD) on Wednesday, extending its decline for the fifth consecutive day. AUD/USD remains under pressure as the US dollar remains relatively strong amid diminishing expectations of an imminent Fed rate cut.
However, the AUD's weakness alone cannot be too deep. This is because the market is becoming increasingly wary that the Reserve Bank of Australia (RBA) could begin raising interest rates as soon as February.
Two major Australian banks, Commonwealth Bank of Australia (CBA) and National Australia Bank (NAB), now project that the RBA will tighten policy sooner than previously expected. The reason: inflation remains stubborn and economic capacity is considered limited, so price pressures have not fully subsided.
This prediction is also in line with the RBA's hawkish stance when it held interest rates at its last meeting in 2025 last week. In the swap market, the probability of an interest rate hike is starting to build: around 28% in February, rising to almost 41% in March, and August is almost fully priced in.
On the other hand, the USD remains strong because the mixed US employment data wasn't strong enough to revive expectations of a Fed rate cut. As a result, the dollar remains strong and weighs on the AUD.
Additional pressure comes from Australian business activity data. The manufacturing PMI rose slightly, but the services PMI fell, causing the composite index to weaken. This signal leads the market to believe that growth is not yet evenly solid—so the AUD remains vulnerable until there is a clearer catalyst from the RBA or further global data. (asd)
Source: Newsmaker.id
