2026-01-27 13:44:00
Australian markets reopened today after a long weekend with the ASX 200 up 0.9%. Naturally the gains were led by by miners, including Capstone Copper, which was up 7.7%. BNP also jumped 3.1% to pass Commonwealth Bank and become the country’s largest company for the first time since October 2024.
I made the case for Australian dollar buying yesterday and the technicals today are underscoring the shift. AUD/USD broke above the September 2024 highs at 0.6937. That puts the 70-cent level squarely in view, with little other resistance until the Feb 2023 high of 0.7159.
On the fundamental side, the Australian dollar is riding a wave of momentum following Friday’s robust employment data, as markets increasingly anticipate a series of rate hikes. The unemployment rate fell to 4.1% from 4.3%.
With the cash rate currently at 3.60%, the OIS curve is projecting a climb to 4.30% by year-end. Traders see a 63% probability of a hike in early February, with a move by the end of March at +80%.
Looking ahead, a second hike is fully priced in by September, with61 bps priced in by December. This hawkish trajectory stands in stark contrast to the Federal Reserve, where markets are currently pricing in almost two full rate cuts. That side of the equation could be jarred by the imminent selection of a new Fed chair.
The other short term driver for the Australian dollar is metals. Gold and silver are higher once again today after a late flush yesterday with gold up $60 to $5073 and silver up 7% to $111/oz. Copper remains near peak levels.
This metals surge will undoubtedly trigger significant investment inflows into the Australian mining sector. Furthermore, as investors seek alternatives to the yen and franc for safe-haven flows. The AUD’s 4% yield is a big contrast to those names and it remains in the bottom half of the 10-year range. .
