Bucking the trend
The Aussie Dollar has broken out from recent ranges and is on a convincing upward trajectory. Post-Covid, the antipodean currencies, AUD and NZD, had found themselves a step ahead of the dominant global cycle shared between the likes of the UK, EU, and US economies. Over the past couple of years that had left ailing demand for the traditional high-beta currencies AUD and NZD. The former in particular displayed distractions from the noise offered from the Chinese economy, often playing the role of proxy as a result of its high economic integration with China.
Since mid-2025, the Australian Dollar in particular has been staging a reversal of its post-Covid misfortune. That move has accelerated sharply this week following the decision from the Reserve Bank of Australia (RBA) to raise interest rates by 25 basis points. This move had not been entirely unexpected with Australian inflation by some measures being seen to take a turn higher into the new year. However, the decision from the RBA was far from unanimously expected within the market. A strong intraday jump in most AUD pairs of close to 1% reflected this surprise.
It isn’t clear yet whether the rise in inflation will endure or be responsive to this action from the RBA. That in turn leaves the jury out as to whether we might expect this week’s decision to be an outlying adjustment or the start of a new cycle higher. With the RBA having last cut rates only 6 months ago the decision this week certainly represents a rapid change of bias amongst rate setters. The Ashes tournament has been cited as a possible contributor to the jump in inflation observed earlier this year. Imagine if England had been able to hold their wickets a little longer, perhaps we’d have seen a 50 basis-point hike!
Discussion and Analysis by Charles Porter
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