pricing pulled 10-year yields to around 4.66% and kept the Australia–US yield gap stuck near 65 basis points, limiting any extra lift versus the greenback. RBA Deputy Governor Andrew Hauser also called the inflation slowdown “helpful”, but the next key checkpoint is the Jan 28 CPI release.
Why should I care?
For markets: FX is following the data again.
If Jan 28 CPI reaccelerates, rate expectations could snap back and boost the aussie, especially against lower-yielding currencies. If inflation keeps cooling, falling yields could cap AUD/USD even if the currency stays strong on crosses. Commodity tailwinds still matter – firmer iron ore, copper, and gold typically support Australia’s export income and, in turn, the currency.
The bigger picture: Policy gaps are doing the heavy lifting.
Currency moves are increasingly about central banks drifting apart. Australia’s path is being compared directly with New Zealand’s, where investors expect rates to stay on hold for months, helping push AUD/NZD to a 12-year high. Zoom out further and bond flows, plus sticky yield spreads like the Australia–US gap, can keep exchange rates moving even when global risk sentiment is choppy.