Aussie’s broad-based strength continues today as markets further strengthened expectations that the RBA will deliver two consecutive rate hikes in the coming months. Investors are increasingly convinced that the RBA will raise the cash rate at the March 17 meeting and follow up with another increase in May, lifting the policy rate from the current 3.85% to 4.35%.
What has significantly reinforced the narrative this week is the alignment among Australia’s major banks. Commonwealth Bank and ANZ have now joined NAB and Westpac in forecasting back-to-back hikes. With all four major institutions now projecting the same policy path, the market has quickly embraced the view that the RBA is preparing to act more decisively against inflation risks.
A key driver behind this shift is the belief that the RBA is becoming increasingly “activist” in defending inflation expectations. Westpac Chief Economist Luci Ellis, a former senior RBA official, noted that policymakers may now respond more aggressively to the headline inflation shock caused by rising oil prices. Acting pre-emptively could help prevent the energy-driven spike from becoming embedded in longer-term inflation expectations.
The urgency is understandable given Australia’s recent inflation data. Core inflation jumped to 3.4% in January, already well above the RBA’s 2–3% target range. With global energy prices surging following the Iran war, policymakers appear increasingly concerned that the inflation outlook could deteriorate further if action is delayed.
Despite the growing hawkish expectations, markets still broadly believe the tightening cycle will peak at around 4.35%. This level is widely viewed as sufficiently restrictive to contain inflation pressures while avoiding a sharp economic downturn. However, the more important question may be how long rates remain elevated. Many analysts now believe policy could stay at that level well into the second half of 2027.
Technically, AUD/JPY has been one of the clearest beneficiaries of this shift in expectations. The cross surged above 38.2% projection of 96.24 to 110.78 from 107.67 at 113.22 this week. While the cross is now testing the ceiling of its rising channel and could see short-term consolidation, the broader outlook remains bullish as long as the former resistance at 110.78 holds as support. The next upside target for AUD/JPY is 61.8% projection at 116.20.
Meanwhile, GBP/AUD has continued its decline and has already reached 200% projection of 2.0848 to 1.9984 from 2.0472 at 1.8744. While the cross may attempt a temporary rebound from the falling channel floor, the broader outlook remains bearish. As long as resistance at 1.9114 caps any recovery, the downtrend is likely to continue toward 261.8% projection at 1.8210.
