AUD/USD surges past 0.6700 amid increased risk appetite and expectations of further RBA tightening

Australian Dollar Leads Major Currencies as Year Begins

At the start of the year, the Australian Dollar stands out as the strongest among major currencies, gaining close to 0.5% against the US Dollar on the daily chart. This upward movement is fueled by optimistic market sentiment and growing speculation that the Reserve Bank of Australia (RBA) could soon raise interest rates.

Following the December 9 monetary policy announcement, RBA Governor Michelle Bullock made hawkish remarks, and the meeting minutes highlighted that inflation concerns are now a top priority for policymakers. The possibility of a rate increase was actively discussed last month.

Australia’s annual consumer inflation rate climbed to 3.8% in October, up from 3.6% in September and 3.2% in August. With the November inflation data set to be released next week and wage growth indicating persistent price pressures, expectations for an RBA rate hike remain strong, which could further support the Australian Dollar.

Meanwhile, in the United States, the Federal Reserve is still in the midst of its monetary policy easing cycle. Although recent US economic indicators, such as this week’s Jobless Claims, have been encouraging, it is anticipated that President Donald Trump may replace Chairman Jerome Powell with a more dovish candidate when Powell’s term ends in May.

Trading activity is subdued this Friday due to New Year’s holidays in Japan and China. The main event on the economic calendar is the release of the US S&P Global Manufacturing PMI, which is projected to show a slight decrease in business activity to 51.8 in December from 52.2 in November, still reflecting moderate growth in the sector.

(Correction made on January 2 at 08:00 (UTC+0): The report refers to the US S&P Global Manufacturing PMI, not the US S&P Global Marketing PMI as previously stated.)