AUD/USD is leading G10 currencies in early 2026, approaching resistance at 0.6800, supported by inflation tracking above the RBA’s target range. The RBA’s pause in easing, coupled with expectations of rate hikes and improving capacity utilization, underpins a constructive outlook for the Australian Dollar (AUD), BBH FX analysts report.

RBA signals end of easing, hikes priced for 2026

"AUD leads G10 currencies in the new year, with AUD/USD eyeing next resistance at 0.6800. Australia inflation eased in November but remains above the RBA’s 2-3% target range. Headline CPI was 3.4% y/y (consensus: 3.6%) vs. 3.8% in October and the policy-relevant trimmed mean CPI matched consensus at 3.2% y/y vs. 3.3% in October. Headline and trimmed mean inflation are tracking the RBA’s December projection of 3.3% and 3.2%, respectively."

"At its last December meeting, the RBA stressed it’s done easing, warning 'the risks to inflation have tilted to the upside'. RBA cash rate futures imply nearly 50bps of hikes to 4.10% in 2026 which bodes well for AUD. For now, this seems reasonable given modest excess demand in the economy. The NAB measure of capacity utilization has improved above its long-term moving average, suggesting businesses are using more of their available productive capacity to meet demand."