Strong expectations of Australian dollar appreciation, RMB against AUD under pressure! The shift to interest rate hikes by the central bank in 2026 becomes crucial

The market is re-pricing the outlook for the Australian dollar. As signals of a shift in the Reserve Bank of Australia’s policy stance become increasingly clear, a consensus has formed that the AUD/USD will remain on an upward trend, which also directly influences the RMB/AUD exchange rate movement.

Household Spending Data Breaks Expectations of Rate Cuts

On December 4, the Australian Bureau of Statistics released consumption data that marked a turning point. Household spending in October increased by 1.3% month-on-month, well above the market expectation of 0.6%; year-on-year growth was 5.6%, also exceeding the expected 4.6%. This data indicates that domestic demand in Australia remains robust, and consumer momentum has not yet waned.

Stimulated by this, the yield on the 3-year Australian government bond broke through the 4% key level, reaching a new high since January of this year. Abhijit Surya, an analyst at Capital Economics, pointed out that this data combination fully demonstrates that the Reserve Bank of Australia will not continue easing and instead faces pressure to tighten policy— the dual impact of inflation and growth continuously compresses the central bank’s policy space.

Inflation Shows No Sign of Easing, Rate Hike Expectations Rise

More notably, Australia’s October Consumer Price Index (CPI) year-on-year growth reached 3.8%, surpassing market expectations, indicating that inflationary pressures have not significantly eased. This persistent price pressure, coupled with strong domestic demand, continues to elevate market expectations for a policy shift by the Reserve Bank of Australia.

The RBA will announce its interest rate decision on December 9. Although the bank has already cut rates three times this year, in the current inflation environment, the market generally expects the RBA to pause adjustments and keep the official cash rate at 3.6%.

More critically, the market is re-pricing the probability of rate hikes in 2026. After the household spending data was released, the probability of a rate hike in May 2026 surged from 18% on Wednesday to 55%— this shift reflects a significant increase in investor confidence regarding the RBA’s policy shift.

AUD Appreciation Potential Opens, RMB to AUD Faces Adjustment

Multiple major institutions share a consensus of an optimistic outlook for the AUD. National Australia Bank (NAB) expects the AUD/USD to rise from 0.67 in December 2025 to 0.71 by June 2026. Westpac Bank provides a more detailed path: reaching 0.69 by March 2026, rising to 0.70 by September, and touching 0.71 by year-end. ING’s expectations are relatively moderate, projecting the AUD/USD to reach 0.68 in the second quarter of 2026 and 0.69 by the end of the year.

The logic behind these forecasts is clear: shifting from an accommodative to a neutral or even tightening monetary policy will enhance the relative attractiveness of the AUD. Correspondingly, the RMB to AUD exchange rate will also adjust—an appreciation of the AUD means increased downward pressure on the RMB against the AUD, which is an important exchange rate signal for companies and investors involved in Australian trade.