Key Moments
- AUD/USD climbed toward 0.6680 as the Australian Dollar outperformed major peers.
- RBA minutes showed policymakers discussed possible rate hikes in 2026 amid rising inflation risks.
- Traders awaited the flash US Q3 GDP release at 13:30 GMT, with consensus at 3.2% after 3.8% previously.
AUD/USD Extends Rally on RBA Minutes
The AUD/USD pair continued its gains from Monday, moving toward 0.6680 during the European session on Tuesday. The Australian Dollar outperformed other major currencies, boosted by the Reserve Bank of Australia (RBA) minutes from its December 9 policy meeting. At that meeting, the RBA kept the Official Cash Rate (OCR) at 3.6%.
The minutes suggested policymakers no longer consider the current stance restrictive and noted upside risks to inflation. This combination strengthened demand for the Aussie against the US Dollar.
Australian Dollar Performance vs Major Currencies
The report highlighted that the Australian Dollar was the strongest performer against the US Dollar. A heat map showed percentage changes of major currencies relative to one another, with AUD among the base currencies.
| Currency Pair | Performance Comment |
|---|---|
| AUD/USD | AUD was the strongest against the US Dollar. |
The heat map selects the base currency from the left column and the quote currency from the top row. For example, choosing AUD as the base and USD as the quote shows the percentage change for AUD/USD.
RBA Signals Possible Rate Increases
The minutes revealed that RBA policymakers discussed raising interest rates in 2026 due to higher inflation risks. The document stated: “Discussed whether a rate increase might be needed at some point in 2026, as recent data indicated risks to inflation have increased to the upside.”
These comments signaled a potential tighter monetary policy, bolstering hawkish expectations. According to Reuters, interest rate swaps reflected a 27% chance of a rate hike at the RBA’s February meeting, with a full move priced in by June. Additionally, there was a 56% probability of another increase by the end of 2026.
US Dollar Weakness Supports AUD/USD
Alongside RBA support, US Dollar softness helped AUD/USD. The US Dollar Index (DXY), tracking the Greenback against six major peers, was down 0.16%, trading near 98.00. This level is close to last week’s 11-week low of 97.87.
Expectations for a more dovish Federal Reserve in 2026 weighed on the USD. The CME FedWatch tool showed a 73.8% chance of a rate cut of at least 50 basis points next year.
Market Eyes Upcoming US GDP Data
Investors focused on the preliminary US GDP reading, scheduled for 13:30 GMT on Tuesday.
US GDP Annualized: Definition and Expectations
The US Bureau of Economic Analysis publishes real GDP Annualized quarterly. This metric measures the annualized value of final goods and services produced in the US. Strong GDP readings generally support the USD, while weaker data tend to pressure it.
| Indicator | Details |
|---|---|
| Next Release | Tue Dec 23, 2025 13:30 (Prelim) |
| Frequency | Quarterly |
| Consensus | 3.2% |
| Previous | 3.8% |
| Source | US Bureau of Economic Analysis |
Revisions and Market Impact
The BEA releases GDP growth in three stages: an initial estimate followed by two revisions. The third release is treated as final. Traders usually react most to the first estimate. An upside surprise tends to support the USD, while a weaker reading pressures it.
Later revisions are less market-moving, as they rarely change the broader growth picture.
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