AUD/USD: Growth signals soften as RBA bias stays hawkish – BNY

BNY’s Head of Markets Macro Strategy Bob Savage highlights that Australia’s Westpac-Melbourne Institute Leading Index slowed sharply, suggesting stalled momentum even as commodity prices support the Australian Dollar. The Reserve Bank of Australia remains biased toward further rate hikes if data allow, while AUD/USD trades near a longer-term value of 0.75, where exchange rate effects on inflation and trade are seen as diminishing.

Leading index stalls while AUD holds

"New Zealand’s policy outlook is still different from Australia’s, as the RBNZ sees a neutral bias with balanced inflation risks, while the RBA is biased toward further hiking should the data support it."

"Australia’s Westpac-Melbourne Institute Leading Index slowed to 0.02% in January 2026.Six-month annualized growth slowed to +0.02% in January from +0.44% in December, indicating that economic momentum has stalled."

"The slowdown was driven by weaker consumer sentiment and housing approvals, offset partially by rising commodity prices. Consumer expectations and dwelling approvals reduced the index by 0.16 percentage points and 0.23 percentage points, respectively, over six months."

"Commodity prices added 0.36 percentage points, but gains were dampened by 4% AUD appreciation. Further RBA interest rate hikes are expected to weigh on growth."

"Australia’s wage price index rose 0.8% q/q inQ4 2025, matching the Q3 2025 increase and up from 0.7% in Q4 2024. Annual wage growth reached 3.4% y/y, up from 3.3% in Q3 2025 and 3.2% in Q4 2024."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)