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AUD/USD strung itself along the 0.6700 handle for the second day in a row as the Aussie-Dollar pairing grapples with end-of-year market volumes restraining overall momentum. The Australian Dollar is looking upward as the Reserve Bank of Australia (RBA) inches toward a fresh rate hiking cycle, with the US Dollar (USD) under pressure across the board from a dovish Federal Reserve (Fed) poised for further rate cuts through 2026.

The RBA is staring down the barrel of a fresh rate cutting cycle as Australian economic data supports higher rates. Australian futures markets are pricing in a 34% chance that the RBA will get pushed into delivering a rate hike at its next rate call on February 3.

Fed heading for more rate cuts, but inflation remains the linchpin

The Federal Reserve’s (Fed) latest Meeting Minutes from its last interest rate decision of the year were released, giving investors a confirmation that Federal Open Market Committee (FOMC) voters are willing to play ball on the concept of further rate cuts, but otherwise revealing little of note. The Fed is tilting into the dovish side, with the majority of rate-setters willing to explore further rate trims, but Fed policy changes still rely on easing, not absent, inflation data.

AUD/USD daily chart

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