AUD: Strength supported by rate hike expectations – HSBC

HSBC reports that the Australian Dollar (AUD) is being supported by domestic factors, including expectations of rate hikes from the Reserve Bank of Australia (RBA) in 2026. The RBA is anticipated to begin tightening on February 3, with markets pricing in a significant chance of this move. The report also notes that New Zealand's economic recovery may present upside risks for the New Zealand Dollar (NZD) in the coming months.

Rate hikes bolster AUD outlook

"On the domestic front, several factors are supporting the AUD. Our economists expect both the Reserve Bank of Australia (RBA) and the Reserve Bank of New Zealand (RBNZ) to deliver two rate hikes in 2026, with the RBA anticipated to begin tightening on 3 February."

"Markets currently price in a c60% chance of this move, suggesting further potential for rates-driven AUD strength. While New Zealand’s rate hikes may come later, its economic recovery is gaining momentum, aided by supportive fiscal policy ahead of the general election on 7 November."

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