The Aussie dollar edged up on rate hike hopes but fell on Middle East tensions, holding near 0.7100 amid strong data and high inflation.

The Australian dollar fluctuated around 0.7100 amid shifting market sentiment, strengthening initially on hints of further RBA rate hikes, as Governor Michele Bullock signaled a hawkish stance with a potential March rate increase. However, heightened Middle East tensions triggered a flight-to-safety rally, boosting the U.S. dollar and pressuring the AUD. Despite the pullback, AUD/USD held within its 0.7000–0.7150 range, supported by persistent inflation, tight monetary policy, and resilient domestic data, including steady employment, stable retail spending, and a widening trade surplus. Core inflation remains elevated at 3.4%, with the RBA expecting inflation to peak in mid-2026. Markets anticipate modest further tightening, while China’s stable but subdued growth limits export upside.