Core Viewpoint - The Australian dollar (AUD) has shown strong performance against the US dollar (USD) at the beginning of 2026, with a year-to-date increase of nearly 4%, supported by expectations of interest rate hikes from the Reserve Bank of Australia (RBA), widening interest rate differentials, and a weakening USD [1][2]. Group 1: Currency Performance - As of January 28, 2026, the AUD/USD exchange rate was reported at 0.6989, having reached a high of 0.7011 earlier, marking a new peak for 2023 [1]. - The AUD has been among the top three G10 currencies in terms of appreciation, driven by a significant drop in the USD index, which fell by 1% to below 96, the lowest level since February 2022 [1][2]. Group 2: Economic Indicators - The Australian Consumer Price Index (CPI) for December showed a year-on-year increase of 3.8%, up from 3.4% previously, with core CPI at 3.4%, exceeding the RBA's target range of 2%-3% [1]. - Employment data for December indicated an increase of 65,200 jobs, with the unemployment rate dropping to 4.1%, reinforcing the case for a potential interest rate hike [2]. Group 3: Market Expectations - Following the CPI release, the market's expectation for a 25 basis point rate hike by the RBA on February 3 increased from 63% to 74% [2]. - The technical outlook for the AUD/USD shows a clear upward trend, with the price consistently above the 200-day moving average and a relative strength index (RSI) above 58, indicating further upward potential [2]. Group 4: Future Events - The short-term focus for the AUD will be on two key events: the Federal Reserve's meeting minutes on January 28 and the RBA's monetary policy meeting on February 3, which will influence the USD's trajectory and interest rate expectations [3].