Consumer inflation in Australia increased by 3.8% year-on-year in the fourth quarter of 2025, significantly higher than the 3.4% seen in the previous quarter. The quarterly trimmed mean index, which the RBA considers when formulating monetary policy, rose from 3% to 3.4%, marking the first increase since the fourth quarter of 2024 and moving above the RBA's target range of 1-3%.

It cannot yet be confidently stated that the current price dynamics are sufficient for the RBA to raise rates at its next meeting in February. Until last week, the market had already pivoted to the view that the RBA had concluded its rate-cutting cycle, pausing at 3.6% and holding rates steady through four consecutive meetings, with forecasts suggesting that rates would be raised twice this year. The question now is when this will occur—already in February or later.

Last week, a strong employment report was released, and following its publication, the probability that the RBA starts a tightening cycle in February rose to 60%. The inflation report can clearly be viewed as supportive of a rate increase, so it is likely that the RBA will choose to tighten monetary policy.

Such an outcome would not be surprising; inflation reached a low of 1.9% in June last year and has since resumed its upward trajectory. Given the market's expectation of rising rates, it is essential to consider the possibility that the RBA will not delay its decision. This is undoubtedly a powerful bullish factor for the Aussie.

As for the US dollar, it has slightly rebounded from its losses at the beginning of the week. Recall that significant sell-offs began after rumors surfaced that the Bank of Japan was preparing an intervention to curb the yen's decline, supposedly coordinated with the Federal Reserve. However, since the goal has already been achieved and the yen has strengthened sharply, the effect of these rumors was similar to that of an actual intervention, suggesting there is currently no need for a real intervention. This, in turn, gives the dollar a chance to recover some of its losses, but certainly, this will not help in the long term.

Speculative positioning in AUD has changed little over the reporting week, and the calculated price has once again moved upward after some reflection.

A week ago, we anticipated a bullish impulse in AUD/USD toward 0.6945, and this target has been achieved. Moreover, the pair has confidently strengthened above it, approaching a 3-year high, with good prospects for continued upward movement. There are no significant resistances until the broad zone of 0.7160/7210, but a technical correction after the rapid rise poses a risk; here, the level of 0.6945 acts as support, which is likely to hold. Movements could occur this evening after the Fed meeting, but predicting the direction seems impossible given the many factors that could influence Chairman Powell's comments.